The New Normal
David Kelly, Chief Market Strategist, JPMorgan Funds
The above link will take you to a thoughtful interview with David R. Kelly, Chief Market Strategist, for JP Morgan Funds.
During the fourth quarter 2008 global meltdown, I was calmed a weekly basis by attending telephone confrerence calls hosted by Dr. Kelly. I continue to find his insights powerful when common sense often goes on vacation and is replaced with panic. As I read the other day, “fear is not a Growth Strategy”.
Select quotes below:
“DAVID KELLY, CHIEF MARKET STRATEGIST FOR JPMORGAN FUNDS, is fairly upbeat about the likelihood of an economic recovery. He thinks a bottom has been reached, and a strong rebound will ensue. Yet Kelly, 46 years old, readily admits forecasting can be a miserable venture. Yes, we are in a severe recession, but diversification remains the best defense in the long term. Market-timing isn’t worthwhile — as many individual investors learned when they pulled out of equities during the recent market meltdown. Last week he gave Barron’s his updated view.”
“Your forecast for 4% GDP growth during a recovery is more optimistic than others’. Is it too bullish?
No. I don’t think so. It is very representative of expansions we have seen. Now, it is possible that we could have a W-shaped recession, in which case things deteriorate again. All I’m saying is that if the economy begins to get into an expansion like those of the 1980s or 1990s, chances are it will be an expansion characterized by about 4% GDP growth, which we actually saw in those expansions. It is very hard, in the teeth of a brutal recession, to think about the characteristics of an expansion. But expansions by definition have above-average economic growth.”
Hold on tight for a bumpy ride to the ‘new normal’
Published: June 16 2009 03:00 | Last updated: June 16 2009 03:00
At its most fundamental level, 2009 is about the interaction of three factors: the healing of financial markets, second-round economic and political effects and partial reconfiguration of the longer-term landscape. We face the challenge of navigating a bumpy journey to a “new normal”. The answers to four basic questions are the key to addressing this challenge successfully.
First, how far will the balance shift from markets to governments?
Second, how will governments finance their growing involvement in the economy?
Third, to what extent will this alter the role of the US in the global economy?
Fourth, how far will governments go in de-risking the financial system?
These four issues are consequential and call for a re-tooling of mindsets, institutions and approaches. Those who recognise this will fare better during a year that promises both the best and worst of times for businesses.
