We find such a bearish economic scenario difficult to visualize. The global economy is doing well while the factors that drive global growth continue to improve. Most foreign central banks are not punishing growth to the same degree as the U.S. Fed. Pro-growth fiscal policies are spreading in key markets such as China, India, Brazil, Russia, Germany, France, and Southeast Asia. Inventory overhangs may have a prolonged depressant effect on pricing in some industries.
Investors have a permanent aversion to cyclicals in the new economy.
The new economy has indeed brought with it a kind of generalized aversion to basic industries among many investors. Once again, though, this very likely has been priced in at today s bargain-basement levels for cyclical firms. We often have likened cutting-edge tech stocks to babies in diapers. They can grow more rapidly than mature firms but also are more susceptible to sickness and disease. For tech stocks, new tax and regulatory risks have appeared in recent months, including the stepped-up efforts to impose an internet sales tax and reduce patent rights.