End of an era? - Financial Markets Outlook
08/22/2008
Further speculation of a likely bail out of Fannie Mae and Freddie Mac have sent markets into another spin this week.
Yet, despite the clear evidence that both of these government-sponsored enterprises (GSEs) have full government backing, risk indicators have been rising…
…and not just on Fannie and Freddie.
Indeed, markets seem to have re-awoken to the fact that the credit crunch is still in full swing – nationalising these two GSEs could yet have further market ramifications.
Meanwhile, corporate defaults are now decisively turning upwards. In addition, lead indicators suggest that much of this credit crunch, and the second round effects it will have on the real economy, lie ahead.
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