The Madness Continues

All eyes continue to be on the United States equity markets this week as the world remains concerned about a possible return to recession.  After the depressing events of Monday which saw a decline in the Dow Jones index of more than 600 points, there were expectant worries about Tuesday.  After trading moderately up for most of the day the index dropped 200 points after the Fed discussion in the afternoon.  This fall was short lived however and in the last half hour of trading the market surged up closing higher by more than 400 points.

On Wednesday one could be forgiven for thinking that the upward trend would continue however concerns about Europe raised their heads again sending the index down.  The Dow fell by more than 500 points and actually closed lower than the level reached on Monday.  This was not a good sign and it would take a brave man to bet on a recovery on Thursday.  However, an unexpected decline in jobless claims in the United States gave hope to the market that the US economy is strengthening and the market rebounded by advancing more than 400 points.

You might wonder why I have been focusing on the US market this week but the events that have been happening reflect the confidence that investors have in the various markets.  It is clear that at this time the market is still very volatile and there is very little confidence in the world governments to sort out the mess.  All of this results in problems for Jamaica which is heavily dependent on its nearest neighbour the United States.  If the economic recovery takes longer than expected then it will take longer for the benefits to accrue to us.  Everything is affected from bauxite to tourism but more importantly our ability to borrow may be compromised. 

This is why no matter what anyone says Jamaica has no choice but to stay with the International Monetary Fund for now.  We may not agree with all aspects of the deal or with all recommendations of the Fund but until we rectify our financial situation we need someone who will assist us with needed financing and who will also enforce spending restrictions upon us as well.  But borrowing more is not the answer and it is important that we lay a good foundation to promote future economic growth.  This brings us to the main point that our growth is dependent upon what is happening internationally but does not end there.  Whichever government is power it is important to recognise that we must continue with the programme in order to reap the future rewards.

So keep observing the markets look for the signs of recovery, look for the signs of optimism but remember that part of the solution is in our hands.