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1086-report

Global & Regional Monthly

01 July 2009
• Encouraging signs have recently appeared that the global economy is starting to recover from the severe contraction that took place in Q4 08 and Q1 09, as massive fiscal and monetary stimulus has managed to stabilize expectations, putting a halt to the freefall of economic activity.
• Our leading indicator of a rebound of the US economy currently points to a probability of 57% that the worst is over, well above the average level of 34% which the indicator had reached at the end of the previous 10 recessions.
• We believe that the US recession will likely end by late summer and the global economy will start to rebound by year-end. However, the recovery will be weak, as policy shocks fade, oil prices stay elevated and bond yields increase due to excessive fiscal deficits. Hence, we expect the Fed to keep short term interest rates unchanged until Q2 2010.
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