Nov 10, 2012 No Comments ›› Pat Dollard
Excerpted from CNBC: All the problems investors face—from a fiscal meltdown to the various economic woes around the world—add up to one daunting prospect: Another possible recession just over the horizon.
As the financial world puts Tuesday’s presidential election behind it, the light in the tunnel could be an economic freight train.
Slowing corporate profits, the remnants of Superstorm Sandy and the ramifications of the “fiscal cliff” in Washington are expected to result in at least two quarters of slow or no growth that could make investing even trickier than it was during the ups and downs of 2012.
“The other overriding problem is we never really gained true escape velocity this cycle,” David Rosenberg, economist and strategist at Gluskin Sheff in Toronto, told CNBC. (Read More: CEOs to Washington: Get a ‘Fiscal Cliff’ Deal Done)
That “escape velocity” refers to the strength an economy shows in which it catapults itself out of a tight range of growth and can withstand shocks such as those posed in the U.S.
As Rosenberg pointed out, the economy in the late 1980s was able to tolerate the Black Monday stock market crash, while the late 1990s strength was enough to fend off the Asian crisis.
With current U.S. gross domestic product growth at just 2 percent, that’s not enough to battle through problems as steep as the fiscal cliff of tax increases and spending cuts, as well as storm damage and weakness in global markets.
“There’s no question that if we get the fiscal cliff that we’re going to get recession next year,” Rosenberg said. “The only question is how deep.”