-Jane Foley is research director at Forex.com. The opinions expressed are her own.-
Earlier this week the S&P 500 was down 15 percent from its April 2010 high. The ongoing debate on whether the U.S. economy is poised for a double dip recession can be linked with these falls.
At present there is insufficient evidence to conclude that the U.S. economy will fall back into recession, though there are signs that the recovery could be losing momentum. A key question is whether the adjustment in asset prices seen since the end of April has been appropriate.
Proponents of double-dip imply that asset prices may have further to fall. In contrast, die hard bulls suggest that equity valuations are looking cheap. In the past few sessions, the bulls have been gaining the upper hand.
The reining in of government fiscal incentives and in many cases the implementation of austerity measures suggests that economic growth in most of the developed world will be constrained for the next few years.