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A "UFO Recession"?

Posted by: Ben Steverman on May 19, 2008

Stocks hit a four-and-a-half month high today. The S&P 500 is now less than than 9% off its all-time high. As many market commentators have pointed out, this is not a stock market priced for a deep recession. Investors clearly expect earnings and economic data to rebound later this year.

Last week, the respected economist and market strategist Ed Yardeni offered a great summary of economists’ different views:
“Many economists use letters of the alphabet to describe their forecasts for the downturn: There’s the severe V shaped recession followed by a sharp recovery, the double-dip W, the prolonged U, and the dreaded L. I see a saucer shaped pattern for the economy.”
But the true gem was Yardeni’s relay of a description he heard while at a conference up in Canada:
“One wag up North suggested that it might be more like a flying saucer—a UFO recession. We will never be sure if we really saw it, or just imagined it.”
A UFO recession. I like that. It’s probably the best-case scenario for investors. Many have already spotted the UFO and are cowering in their basements — particularly those smarting from falling home prices, banking layoffs or high gas prices. But the rest of us — and most investors — might not notice much at all.
That’s the hope anyway.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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