Will Global Events and Economic Quandary Impede US Recovery?

After declining nearly 300 points at the start of the trading day (Tuesday ), the Dow average was able to find its way back - ending the trading day only 22.8 points down. The global pull back in Europe and Asia's overnight trading rippled across the globe impacting London, Paris, Hong Kong and Tokyo indexes - bringing them to their lowest point for the year. It is speculated that the news of European banks having to pay premium to borrowing in interbank markets have contributed to the anxiety for investors. No doubt the temporary fix for Greece’s trouble remains a dark cloud for the Market. It certainly doesn’t help that tensions are mounting between North and South Korea. In spite of the fact that the Market was able to regain much of the day's earlier losses, there is still a feeling of lingering uncertainty among the investors. Traders and money managers are said to be getting the sense that this is not going to dissipate anytime soon.

A New York Times article points out that the troubles in Europe may have a negative impact on the US recovery. I couldn’t agree more. We are now more susceptible to volatility based upon the political and economic discord around the globe. After reading "The World is Flat" by Thomas L. Friedman, my perspective is forever changed. According to Friedman, in today’s globalization of commerce, as a result of the internet and other technological advances, we are all much more connected than we realize. Nevertheless, the fiscal problems mounting in Europe is only one of the factors impacting our economic recovery. The Wall Street reform legislation will dramatically impact the banking industry, which will, in turn, play a role in stunting recovery as well. Don’t get me wrong, I am all for Wall Street being lassoed in a bit, but the timing of these changes may prove to be challenging to our already sluggish recovery.

The Dow Jones Industrial Average is back in low 10,000 level, which is more in line with the where we are economically. I'm sure continued volatility should be anticipated until things settle down, both economically and politically, around the globe.

K. Reilly
Cohn-Reilly Report

___________Comments

Lisa said.....
I read the book "The World is Flat" and it was startling to read how the Internet and wireless communication has created a flattened landscape were business is concerned. The world really is leveled now! So I guess it going to be like dominos when financial troubles hit any of the continents. Nice article

Mark said.....
Technology driven Globalization is like Pandora's Box. Now that's open, there's no turning back. We have to take the good with the bad. Like they say...You can't un-ring the bell.

Katherine said.....
Yes Lisa, we must get used to the idea that the flattened landscape (as you put it) has created the domino effect that has to eventually change our perspective and fiscal strategies as a country going forward. Mark, your comment about Pandora's box is spot on.