Hook joins the alphabet soup

May 6, 2009

About a year ago investors hotly debated what would be the shape of a world economic recovery — would it be a steep V? Or could it be moderate U, stagnating L or double-dipping W?

Now ratings agency Moody’s is introducing the new scenario of “hook-shaped” recovery.

This has the steep downturn signalled by the U-shaped scenario, but neither the steep but delayed rebound of the U scenario, nor the flat stagnation of the L-shaped scenario. Instead, the agency says, it has an upward tilt that lies somewhere in between, implying a gradual and painful economic recovery.

“We cannot rule out that the hook-shaped scenario will evolve into an L-shaped scenario — and there is a real risk of this materializing – but it is too early to adopt the latter as our central scenario. This is because the full effect of government stimulus policies has yet to be seen,” Moody’s says.

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