Going by the outpouring of anguish on Wall Street, it seems that the United States is already in a deep economic slowdown.
The upshot of all this dismay is a big question mark over the pace of economic recovery in the world’s No. 1 economy which, in turn, cast a pall over the rest of the world's stock markets which have traditionally looked to Wall Street for leads on directions.
But the doomsayers’ argument that the US is slipping back into recession is hardly convincing.
For a country whose financial system suffered a massive seizure two years ago, the fall in output has been remarkably small. The only problem is an upsurge in unemployment, with nearly 10 million out of work, which is politically unacceptable, with mid-term Congressional elections coming up in November.
The big question is whether much of this unemployment in the US is structural in nature because jobs had become obsolete because of improvements in technology, or because the companies responsible for them had relocated their operations overseas.
Somehow the binge of mergers and acquisition activities now underway in the United States seems out of step with the suggestion that the country is headed for another economic slowdown.
Companies will not be spending money in a profligate manner to swallow up other businesses, if they believe that another financial storm is in the offing.
Instead, they have been making use of the extraordinarily low interest rates environment to baulk up.
Technology giants like Intel are buying up companies whose technologies may be useful to them in grabbing market share, as the next technology revolution, spawned by the emergence of gadgets such as the iPhone and iPad, takes grip on a new generation of consumers, like what the Sony Walkman, and Apple Computer did 30 years ago.
I have a cynical explanation to offer for Wall Street’s angst though. The second quarter results showed that US investment banks only enjoyed a marginal profit in their trading outfits, as the impact of the huge stimulus provided by the US Federal Reserve last year wore off.
And the current US stock market slump can be traced to August 10, following the Fed’s decision to stay its hands and keep things as they are, rather than provide another huge round of stimulus to soothe the cries on Wall Street.
Depending on how strident the cries become, the Fed may yet cave in – going by its record in the past two years.
So how should a trader play his hands in such a lacklustre market, tempered by uncertainties over what the Fed may or may not do ?
For those who believe that the Fed will capitulate to Wall Street’s demands, there will be money to be made on banks with huge treasury trading outfits which may benefit from another fresh round of money printing.
Another possible group of winners are the technology giants and commodities firms who make use of the Fed’s cheap money policy to snap up rivals and position themselves for the next consumer boom which will have come. Markets do not stay down forever.
Traders here may have to turn global in their search for the next batch of winners in their investment portfolios.