In one of the most memorable stories from the Book of Genesis, Pharaoh had a dream in which seven fat cows were swallowed by seven lean ones. Pharaoh and his men were puzzled until Joseph offered his interpretation: The fat cows represented seven years of prosperity, which would then be swallowed by seven lean years of poverty and famine.The parable seems apt for today, as the AP reports some rare good news: Markets are up nearly everywhere, mostly due to stronger than expected growth in major American companies like Apple and AT&T. Investor confidence, while still lower than it was in its pre-recession heyday, also appears to be rising, a promising sign for a recovery which still has yet to take off.Yet there are warning signs in the report. This new market confidence is driven nearly entirely by the performance of American companies; many of their European counterparts have posted more modest gains or even losses. Meanwhile, the messy state of European politics is doing little to reassure investors that global markets are sound, and some are beginning to worry:
Though a Dutch bond auction on Tuesday helped soothe market fears, investors remain edgy about how the crisis will develop over the coming weeks with general elections taking place in Greece and France. The Netherlands is also expected to go to the polls later in the year after its government collapsed on Monday over a failure to agree on an austerity package.
Over the past year or two, we’ve seen positive economic signs evaporate when another crisis strikes—usually in Europe. This begs the question: could lean cows in Europe be swallowing up fat cows elsewhere?Britain’s economy has just entered the dreaded “double-dip” recession after posting two consecutive quarters of negative growth. As the BBC notes, this will deal a blow to investor confidence:
“It is clearly not good news, the missing link in the economy has been confidence,” said Graeme Leach, chief economist at the Institute of Directors . . . .“These are relatively small falls, so we shouldn’t be too alarmist.“[But] regardless of the figures, it is the message that comes out to business—to be cautious—exactly when we want them to be a little more aggressive in terms of recruitment and investment.”
The dangers here are very real, and they remind us of why Americans should keep a close eye on unfolding events in Europe. Our cows are finally getting fat again; unfortunately there are still plenty of lean cows around to watch out for.