By Faisal Humayun:
The Dow Jones index has rallied by 8% from its lows of 10,720 on August 10. The rally in the markets has been primarily due to oversold market conditions leading to a technical bounce back and Bernanke’s statement, which instilled some confidence in the markets along with hopes of another stimulus announcement in September,
However, Bernanke might refrain from announcing further stimulus later this month. With the recent debt ceiling debate and governments long-term commitment to cut deficits, the policymakers would not be very keen to announce further stimulus until things look terrible for the economy.
There is no doubt that we are headed for a slowdown. However, few economic indicators still makes me believe that there would be no recession. Also, even if the Fed does not act immediately, we are not headed for an economic freefall.
As the chart below shows, the nominal personal consumption expenditure (August 29release)

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