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Things can only get better. Right?

A quick thought on this week’s money news

Another action-packed week, with fears about banks continuing, manufacturers slashing jobs as if cutting grass, and house repossessions in the UK soaring.

No wonder stock markets fell. The UK FTSE 100 dropped 3.32% to close at 3,889, flirting again with the last year’s lows.

The thorn is whether we’re looking at Armageddon, or Growth, Interrupted.

As Behaviour Gap wrote this week, surprises go both ways.

If things do get better in the underlying credit markets – if banks do (or can) regain their appetite for risk, and if currently shunned bonds and other financial assets regain some semblance of fair value – then a virtuous circle will kick in very quickly as balance sheets strengthen and stocks recover.

You don’t need to believe we’ll see a return to the go-go credit years for this scenario to play out. Corporate bonds are apparently pricing in worse defaults than the Great Depression, so arguably just avoiding that dire outcome offers plenty of upside.

Will we avoid it? As governments spend money as only people who own the printing presses can, that’s the several trillion dollar question.

In the meantime, I’m still trickling money into the markets.

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