“Bull-markets are born in pessimism; grow on skepticism, mature on optimism, and die of euphoria.”
The term ‘Green Shoot’ is used to refer any signs that point towards recovery or renewal. The phrase gained popularity after Federal Reserve Chairman, Ben Bernanke, told CBS Program ‘60 Minutes’ in mid of March that he sees green shoots of recovery in the economy and that the recession will come to an end ‘probably this year’. This interview is one of its first kinds by any sitting chairman of Fed in last 20 years.
Let’s now look at the points that support this hypothesis.
First and the most important indicator of economic recovery is the health of the financial markets. Financial markets worldwide had been largely volatile and reacted negatively in the last few months of recession. But slowly it’s getting stable in the recent weeks with improved confidence amongst the participants. Government has gone to great lengths to infuse liquidity in the cash starved system and ensures that the market sentiments are restored. Some steps taken by the government includes:
1) US Treasury chief Geithner had announced a scheme to buy back $1 trillion toxic assets and bad mortgage loans.
2) Several rounds of Fed rate cut: 50 basis points cut on October 29, 2008 followed by the large 75 basis point cut made during a special January 22, 2008 in response to the stock market turmoil that January, as well as a 50 basis point cut on January 30, 2008, a 75 basis point cut on March 18, 2008, and a 50 basis point cut on October 8, 2008.
All these measures taken by the government helped to improve the market confidence to some good extent. Lately banking firms such as Wells Fargo, Bank of America, Citigroup Goldman Sachs and JP Morgan Chase had posted better than expected earnings report which played a great role in restoring the market confidence.
The second most important pointer of revival is the recent shape of Housing Sector. Real estate sector has been developing in Asia Pacific, Australia, New Zealand, Singapore and Hong Kong. US housing sector has also started showing signs of recovery. New home sales went up for the third consecutive month in June to an annual pace of 384,000 homes (In January, the figure stood at 329,000, showing a rise of 16.7% in less than half a year, which is a significant improvement) the most November 2008; also the number of new houses fell to the lowest amount since February 1999, according to the Department of Commerce. The housing sector in the UK also points towards a rebound especially as the nation's biggest residential property and most used real-estate web site, Rightmove, posted that prices in London rose on an annual basis for the first time this year. Rightmove, released its house prices for the month of July coming in at 0.6% which is higher than the prior decline of 0.4% while on the year they also eased their pace of decline to -3.1% from the previous -5.5 percent.
Though green shoots are evident in only some particular sectors, but the belief that the worst has happened, has given fresh new hopes to the investor class and Equity markets is witnessing signs of resurgence.
The term ‘Green Shoot’ is used to refer any signs that point towards recovery or renewal. The phrase gained popularity after Federal Reserve Chairman, Ben Bernanke, told CBS Program ‘60 Minutes’ in mid of March that he sees green shoots of recovery in the economy and that the recession will come to an end ‘probably this year’. This interview is one of its first kinds by any sitting chairman of Fed in last 20 years.
Let’s now look at the points that support this hypothesis.
First and the most important indicator of economic recovery is the health of the financial markets. Financial markets worldwide had been largely volatile and reacted negatively in the last few months of recession. But slowly it’s getting stable in the recent weeks with improved confidence amongst the participants. Government has gone to great lengths to infuse liquidity in the cash starved system and ensures that the market sentiments are restored. Some steps taken by the government includes:
1) US Treasury chief Geithner had announced a scheme to buy back $1 trillion toxic assets and bad mortgage loans.
2) Several rounds of Fed rate cut: 50 basis points cut on October 29, 2008 followed by the large 75 basis point cut made during a special January 22, 2008 in response to the stock market turmoil that January, as well as a 50 basis point cut on January 30, 2008, a 75 basis point cut on March 18, 2008, and a 50 basis point cut on October 8, 2008.
All these measures taken by the government helped to improve the market confidence to some good extent. Lately banking firms such as Wells Fargo, Bank of America, Citigroup Goldman Sachs and JP Morgan Chase had posted better than expected earnings report which played a great role in restoring the market confidence.
The second most important pointer of revival is the recent shape of Housing Sector. Real estate sector has been developing in Asia Pacific, Australia, New Zealand, Singapore and Hong Kong. US housing sector has also started showing signs of recovery. New home sales went up for the third consecutive month in June to an annual pace of 384,000 homes (In January, the figure stood at 329,000, showing a rise of 16.7% in less than half a year, which is a significant improvement) the most November 2008; also the number of new houses fell to the lowest amount since February 1999, according to the Department of Commerce. The housing sector in the UK also points towards a rebound especially as the nation's biggest residential property and most used real-estate web site, Rightmove, posted that prices in London rose on an annual basis for the first time this year. Rightmove, released its house prices for the month of July coming in at 0.6% which is higher than the prior decline of 0.4% while on the year they also eased their pace of decline to -3.1% from the previous -5.5 percent.
Though green shoots are evident in only some particular sectors, but the belief that the worst has happened, has given fresh new hopes to the investor class and Equity markets is witnessing signs of resurgence.
