World Economy : Assessment
The massive loss of wealth on the world’s stockmarkets has emerged as a key risk to global recovery. Equity prices have been falling for a couple of years, but declines have intensified recently. Doubts about the strength of the recovery have played a part, but a loss of faith in the quality of corporate financial reporting has also been important. These worries have mainly centred on the US, but stockmarkets in all parts of the industrialised world have reacted equally badly, indeed worse in some cases. As Table 1 shows, some Eurozone markets have suffered more than those in the US. And now uncertainty over possible military action in Iraq is added to the list of factors holding back equities. There is a danger that recent falls could be the last straw for consumers. Up to now a belief that falls in equity prices would be short-lived, with prices quickly returning to “normal”, may have been widespread. As consumers (especially those who directly own equities and have access to capital markets) are likely to look at lifetime wealth and smooth over short-term volatility, spending has held up well, especially in the US and UK. But if consumers conclude that markets are going to be permanently lower than previously thought, this hit on their wealth may lead them to spend less
Year of publication: |
2013
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Authors: | Publishers, Wiley-Blackwell |
Publisher: |
[S.l.] : SSRN |
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