Discussions with market participants during the International Capital Markets missions focused on concerns about a renewed sharp repricing in U.S. equity and fixed-income markets in the event of a prolonged economic downturn in the United States. In such circumstances, problems in household and corporate balance sheets and in the external imbalance could lead to a significant and potentially disorderly rebalancing of domestic and international portfolios and give rise to increased volatility and the repricing of assets in U.S. and international markets, including, possibly, a sharp decline in the value of the dollar. Spillovers and contagion to other markets could also result, including adjustments in European financial markets (which had been highly correlated with U.S. markets) and a deterioration in external financing conditions for emerging markets.