Recognize this figure? It’s Mr. Toad of Mr. Toad’s Wild Ride fame (I know I’m probably dating myself and you are too if you recognize it). I thought this image provided a reasonable analogy for the rollercoaster ride our global markets have experienced over the last several days.
To put things in perspective, consider the following:
1. Wild fluctuations in the markets (e.g., for the fifth straight day the Dow shifted by 400+ points from the session high to the day’s low) as investors continue to search for “clarity”
2. Nearly $1T of net worth has been lost as a result of the wild market swings
3. Fear is running amok as highlighted by the Volatility Index (VIX - one of my favorite indicators by the way)…as an aside, isn’t really interesting how analysts are able to estimate fear?
To further underscore what is yet to come, we should look no further than the Fed’s decision to maintain interest rates near zero through some time in 2013.
What this means in the short term is anyone’s guess. However, one thing remains clear. We are in for another wild ride if: (1) countries don’t get their fundamentals in order or (2) we experience another shock to the system (e.g., Euro zone debt crisis proliferates beyond the “PIGS” countries, China inflationary pressures), we may be headed for another global recession. While murmurs of another global recession have been getting louder, we should be mindful this one will be a lot different than the last one (circa 2008). This article provides a really good synopsis why:
http://online.wsj.com/article_email/SB10001424053111904140604576496241939456906-lMyQjAxMTAxMDAwOTEwNDkyWj.html?mod=wsj_share_email
Quite interestingly, the factors that are holding us back this time around (e.g., collective lack of faith in governments to remain solvent and spur growth) are also ones that give me hope given the piles of cash many companies are sitting on. Nonetheless, as HR professionals, it is incumbent on us to mitigate these critical uncertainties now. Fortunately, there are things that we can do to hedge risk (e.g., scenario planning, strategic workforce planning)…oh yeah, and fasten our seat belts.
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