Is this the summer of Love?

The sun is shining, house prices are recovering, and overall sentiment about the economy is improving. On the surface it looks like we’re through the worst of this terrible sustained decline. Admittedly in the real economy people are still losing jobs at a ferocious pace, yet some write that off as a lag indicator; something that drags behind the rest of the economy and therefore isn’t too indicative.

Yet a good chunk of the economists & high end city workers who follow the machinations of wider macro level finance still pull a face and say “ it’s nowhere near over yet, it’s going to get worse.” In fact, at a private meeting I was at recently the mutterings of one globally renowned economist questioned whether we should plan for the potential of the western economies “doing a Japan”: in other words ten years of no growth and deflation.

So is this just a summer of love? Rather than the economy moving in an L-shape (in other words a steep decline then a levelling off) there seems to be a strong suspicion that we are in W (we’ve had a decline we’ve now had a small upturn but it’s going to start going back down again).

Much of the talk hinges on the belief the American economy is in a worse shape than we’ve so far seen, and that it’s been delaying reports coming out in a bid to get its house in order first.

Frankly I have no clue which side to take, and in truth nobody does; predictions are never set in stone. Yet it’s important to be aware that even though sentiment has improved at the moment it’s still worth being sensible and taking some safety precautions, such as spreading your savings (see the safe savings guide) and ensuring you’re as debt-free as possible (see redundancy guide and debt help guides).

Comment and discuss