A View from IMF

Business Spectator - IMF says markets could fall extra 20%

"In a worst-case scenario, governments will need a few more weeks to take the correct measures and the markets could fall another 20 per cent. Then, we'll turn around," Mr Blanchard was quoted as saying in Italian daily Corriere della Sera.

Alright, it was about time. This forecast states that, if the G20 meeting does not bear fruit along with other moves by worldwide governments and central banks, the markets could be falling for the next couple of weeks. Quantitatively, this would be further 20% from the current levels.

The positive assumption, in that case, is that the return rally would cover back those 20% effectively restoring the current level as the next starting point. What would happen after that does not really matter at this point. Just to remind, that is the worst case scenario. To say this, it feels as if they at IMF don't believe this would be the case and that the measures, mentioned at the beginning of the post would, after all, bear some fruit in the current circumstances.

Does that mean that hedge funds completed their sell-off? Well, those next 20% would be the total sell-off that some are expecting. Most of the traders and investors, I'd say, are waiting for the upline to jump onboard. I've read some comments in the news that illustrate this opinion among investors. These are the people that will provide the inertia to the rally.