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Two Ways: World Bank Pulls Plug on Economic Recovery

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Strengthen your portfolio in good times and bad.

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The World Bank may have pulled the plug on the economic recovery. This morning, it issued a statement saying the global economy would contract more than previously expected: It now projects a 2.9% contraction for the year, as opposed to the 1.7% it offered up in March.

The bank projected net private capital inflows to fall in the developing countries to $707 billion in 2008, down from $1.2 trillion in 2007. This, along with new regulations and increased scrutiny of the financial system, will put a squeeze on the global economy.

Economies for developing nations are now expected to grow by only 1.2%. In 2008, they showed 5.9% growth; in 2007, the number stood at 8.1%. Excluding China and India, GDP for the emerging markets is projected to fall 1.6%, which will likely cause an increase in both poverty and unemployment.

For more, see Professor John Mauldin's Reports of Economy's Recovery Have Been Greatly Exaggerated.

From the Bull Pen: Although commodities were one of the hardest-hit sectors today, consider Schlumberger (SLB) pulling back to $50, the level where it last broke out. Bulls can fade (read: buy) into that mark, with a sell stop below $49.


From the Bear Cave: Bears can look to JC Penney (JCP), which could be in the early stages of a downtrend. Look for a snapback to $28, with a downside entry if and when.

I hope the worst is over. See you tomorrow morning!
No positions in stocks mentioned.

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