US Leads the Global Economies, EU Struggling
$DIA, $SPY, $QQQ, $RUTX, $VXX
- NAS Comp Hits New Closing High on Strong US Economic Data
- The US economy is driving ahead of the rest of the world, now.
May retail sales that topped forecasts Thursday, as the US racks up growth of at least 4% in the current Quarter after a so-so expansion at the start of the year.
In contrast, the EU central bankers trimmed their outlook for Y 2018, while China showed signs of slowing, and emerging markets from Brazil to Indonesia have been sloftening.
That contrasts with last year’s picture of synchronous growth across the world, which has given way to uneven paths for major economies amid trade tensions and rising global Crude Oil prices.
The Fed raised interest rates on Wednesday for the 2nd time this year, with Chairman Jerome Powell saying the economy is in “great shape.”
Then, Thursday, the People’s Bank of China (PBoC) kept the cost of reverse-repurchase agreements steady, defying predictions it would track the Fed’s hike.
Then, the European Central Bank (ECB) decided to taper bond purchases and pledged to keep interest rates unchanged at current record lows at least through the Summer of Y 2019. ECB President Mario Draghi pointed out that the recent economic “soft patch” may last longer even as he said the economy is in a better situation.
In the US
The world’s largest economy, lower taxes enacted by The Trump Administration, a strong labor market and elevated confidence are helping cushion the pinch to shoppers from higher fuel expenses. That is bolstering prospects for household consumption, which accounts for about 70% of the economy.
President Donald Trump is officially targeting sustained 3% growth but has often talked about an even faster pace.
Meanwhile, the ECB’s updated forecasts for the Euroarea showed economic growth should slow to 2.1% this year, compared with its previous estimate of 2.4%.
In China, the world’s 2nd-largest economy, May data for industrial output, retail sales and investment all came in below analyst projections but still strong.
HeffX-LTN’s chief economist, Shayne Heffernan, PhD, expects global growth of 3.3% this year based on market exchange rates, with the US making a 0.6 percentage-point contribution, the biggest among developed economies and just behind the 0.8-point contribution he has down for China.
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