As I noted, a moderate cyclical recovery characterizes the last several quarters in the United States. But while the recovery is proceeding, investors remain uncertain about its trajectory. Financial market participants are still searching – perhaps better characterized as lurching – for a new equilibrium.
The economy’s path depends in part on whether a new market and public policy equilibrium is established to keep the financial repair process on track. If volatility in financial markets persists at elevated levels, the expected pickup of business fixed investment may disappoint.