No, says one of Wall Street s most prominent analysts. Goldman, Sachs Managing Director Abbey Joseph Cohen told a seminar at the World Economic Forum that last year was the time to worry about market risks, not this year. The markets are already pricing-in a serious recession. Equity markets are priced now for an uglier situation than the one that we believe is likely. Cohen, who chairs her firm s Investment Policy Committee, said that economic and market imbalances that were increasingly evident early last year, are now moving into far healthier balance.
Corporations are, accordingly, moving very fast to adjust inventories and planning.
There are no significant corrections being seen on this front. This time last year the level of margin debt was unusually high, but now it is in better balance. Hedge funds were highly leveraged, now those funds are either out of business or far better hedged. Recently in the US, Ms. Cohen said that she anticipated that the Federal Reserve Board will cut interest rates and change monetary policy to support a swift rebound in the economy. This will become increasingly evident in the second half of the year.