Investors should be cautiously positioned as the global economy and markets face major uncertainties. The downgrade will be a further headwind to growth and job creation in the U.S.
For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default.
America's downgrade may serve as a wakeup call for its policymakers. It is an unambiguous and loud signal of the country's eroding economic strength and global standing. It renders urgent the need to regain the initiative through better economic policymaking and more coherent governance.
It is hard to imagine that, having downgraded the US, S & P will not follow suit on at least one of the other members of the dwindling club of sovereign AAAs. If this were to materialise and involve a country like France, for example, it could complicate the already fragile efforts by Europe to rescue countries in its periphery.
After many decades of Disney movies, we have been conditioned to expect princesses to fall in love quickly with their charming princes and 'live happily ever after.'
The best and most sustainable love story for markets is one based on a healthy and dynamic real economy that creates jobs and opportunities for many more people.
Investors have few spare tires left. Think of the image of a car on a bumpy road to an uncertain destination that has already used up its spare tire. The cash reserves of people have been eaten up by the recent market volatility.
