Matt Trivisonno’s Blog

Stocks finished very strong yesterday and looked to continue the momentum today, but plunged instead. Everybody seems to think it was soaring oil that caused the drop, but we have been living with that for a couple of years now.

Perhaps it was Cisco that triggered the sell-off. Apparently, they saw some deceleration in their emerging-markets business. As Sanjiv Wadhwani of Stifel Nicolaus noted today:

“While the company was able to deliver order growth in-line with expectations, some high growth areas such as the service provider segment and emerging markets showed material deceleration”

Bulls like Jim Cramer have been saying that the US economy doesn’t matter any more because the rest of the world (ROW) is so strong. Part of the recent rally was due to so many S&P 500 companies reporting strong earnings from their ROW operations. Now Cisco has cast doubt upon this thesis that the S&P 500 can “decouple” from the US economy and rally right through this recession.

Cisco is hinting that we are now “re-coupling” with ROW by exporting our recession. Economist A. Gary Shilling who accurately predicted this recession, says that this is actually a routine development in US recessions - ROW feels it with a lag.

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This entry was posted on Wednesday, May 7th, 2008 at 3:42 pm and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.