Anti-Fraud Investments Recession Proof?Analysts Weigh Impact of Latest Market Crash
Things weren't better in the U.S., where the Dow Jones Industrial Average fell nearly 513 points on Thursday - the biggest hit since Sept. 29, 2008, when stocks dropped 778 points. The S&P also fell, dipping 60 points, and the NASDAQ dropped 137 points.
Reduced consumer spending, "combined with the government's forced austerity" could push the global economy back into recession, says Aite financial-services and fraud analyst Julie McNelley. But McNelley doesn't expect investments in fraud prevention to be affected by the caving market. Particularly not at a time when federal regulators expect financial institutions to conform with the updated FFIEC Authentication Guidance.
"The need for fraud-prevention tools increases during times of recession," she says. "That doesn't mean that they'll necessarily see increased spend, but it does mean that they will not see the chopping block quite as quickly as some other types of spending initiatives."
All investment gains made in 2011 have been negated, experts say.
Tim Ghriskey, chief information officer at Solaris Group LLC, a global wealth strategy and asset-management firm, says the strong trade link between the U.S. and Europe has made Europe's rising debt a point of real concern. But the greater worry is the U.S. market's slow recovery growth. "This is an inexpensive stock market," Ghriskey says. "We're still in a recovery and stocks are cheap."
A 'Soft' Global EconomyGhriskey says the "real issue" is that the economy hit a mid-cycle slowdown, namely because of dipping consumer confidence reflected in lower retail sales. "We've been seeing soft economic numbers now consecutively throughout the second quarter," he says. "We haven't seen any disastrous economic numbers, but certainly soft growth and a weakening of growth. That's the big concern out there. It's not the 'Budget Deal' or the 'Deficit Deal,' although I don't think either has helped consumer confidence and the consumer psyche."
That weakened growth has affected the investor's psyche as well. "We're really talking about investor sentiment and investor psychology at this point," Ghriskey says. The Federal Reserve and the Treasury may step forward with some talk of a stimulus package, but that's unlikely, given current interest rates.
But this week's trading panic could be a good thing in the long-run. "Once you reach a point of indiscriminate selling, it generally means that the market is oversold," Ghriskey says. "And that means buyers will come back in to the market because equity is just really cheap."