A bit of cheer from Jim Glassman over at JPMorgan Chase:
The forecast of an economic revival beginning in 2009 is based on six themes. First, the Federal Reserve is flooring the monetary gas pedal and using its balance sheet to counterbalance otherwise life-threatening credit restrictions resulting from shrinking leverage in the financial system; its actions are beginning to get traction. Second, a substantial fiscal stimulus initiative (equivalent to 5-7% of GDP) will be implemented early in 2009. Third, inflated US real estate markets, the cause of the building recession and credit crunch, are history. Fourth, the speculative convulsion in oil and commodity markets evaporated this fall, reversing a massive transfer of resources that was distorting global spending and saving. Fifth, policy responses around the world are matching the forceful US approach and so are lessening the risk that the weakness everywhere will continue to reverberate. And finally, fear has driven asset values to irrationally pessimistic levels, implying that it won’t take much to alter perceptions about the balance of risks and revive animal spirits. The US is likely to be out of the recovery gate first, but the global economy will quickly follow.