Investors not paying attention to the events of the last few days will face a rude shock as they wake up to the realities in the market movements. Summing up the events of the last few days, one can analyze that-fears that the global economy is dangerously close to a recession due to the crisis in the eurozone and static growth in the US sent assets of all shapes and sizes into a worrying nose dive. Among the E7 and G7 countries, only two markets escaped the wrath namely Pakistan and Japan were up by 2.2 percent and 0.5 percent respectively. The worst hit economies in the opposite direction were Russia and Indonesia which went down by 12.2 percent and 10.7 percent respectively. The average return for the 14 countries was a 5.7 percent on the downside.

Even the most sought after alternative investments, in the times of financial strife, faced similar reactions as gold and other commodities weren’t immune to the wave of selling. Silver, copper, platinum all fell by 24 percent, 16.5 percent and 11.2 percent respectively. Gold and oil were down roughly by 9 percent as the yellow metal shed almost $100 an ounce during intraday trading yesterday. In contrast, US Dollar had risen by 2.2 percent. Much of the dollar’s rally came after the Federal Reserve announced ‘Operation Twist’ on Wednesday. The goal is to push down long-term interest rates, which would spur economic activity.

The gold and US Dollar relationship has some interesting readings. Over the past 20 trading days, gold has dropped 8.7 percent while the US dollar appreciated by 6 percent. The market’s reaction to the Fed announcement is indicative of how little confidence investors have in policymakers in controlling what appears to be an escalating situation. The investors certainly recognize the current downside risks for the global economy but it’s worth noting that the investor sentiments and emotions are significant market drivers.

There are some positive developments here and there but the global economies including USA are not out of the woods yet. The US economy will continue to inch its way forward over the next one to two years and the US companies and consumers must adjust to this low-growth environment enveloping the general economy. General investors believe that all the events point to another global recession in the making. The preview has been constructed. Now, all investors are waiting for the release of the actual picture.