Stocks: What to Watch for in the Recession - BusinessWeek
Don’t be surprised to see a new wave of consolidation as stronger players snap up weaker ones
by Ben Steverman
Eventually, the acme will end. That has investors contemplating what a post-crisis stem market might look like.
Predictions of a serious economic downturn are everywhere, and not just as being the U.S. but with respect to the entire terraqueous globe. If the credit crunch lasts long enough, it could be the primary truly thorough economic pullback in a generation or longer.
Asked about the future, multitude professional investors and government bonds managers say they’re far too abstracted with the current decisive turn to form any long-term bets. That’s wherefore they many refuse to pervert with money public securities—the unprecedented global credit crunch has made safe predictions all still impossible.
"I’m going to wait till the dust settles," says William Rutherford, president of Rutherford Investment Management.
Glimpsing the FutureStill, investors will eventually require to picture what the commencing economic order will look be pleased with.
Arguably, a credit crunch or recession makes aggregate of us losers. But even in a severe recession, some businesses survive and prosper—even if only on a relative foundation, and even if they take years to muff through.
"There’s always going to be a winner out there," says Ryan Crane, chief investment officer at Stephens Investment Management Group.
Here are five trends that may issue whenever the crisis finally ends:
1. The strong eat the weak.
In the financial sector, failing banks and brokerage houses wish already been gobbled up by means of safer (if not exactly strong) rivals. Bank of America (BAC) bought up pledge giant Countrywide Financial and Merrill Lynch (MER). JPMorgan Chase (JPM) absorbed Bear Stearns and Washington Mutual. Citigroup (C) and Wells Fargo (WFC) battled over buying Wachovia (WB).
If the economic downturn is bad enough, expect the same trend to hit other industries, as strong players either buy or require place of traffic share from companies in financial trouble.
2. Fast-growing companies might not get the funding they strait.
The credit crunch is keen off the financing that helps businesses be augmented and create new jobs, says Michele Gambera, chief economist at Ibbotson Associates, a unit of Morningstar (MORN). Companies can’t float issues on the stock emporium or sell bonds—investors won’cheek by jowl buy them. And they can’t borrow from banks, which are too panicked to lend.
If those conditions persist, it means trouble for new growth companies. "Who is going to make the next Google (GOOG) admitting that there is no money to borrow to build the next Google campus?" Gambera asks.
