Quick Bite | US Economy & Markets Doing Well

US share market indices have continued to hit all-time highs on a regular basis over the past year. Concerns that these indexes are too concentrated in the mega-cap technology stocks are starting to dissipate as the bull market broadens from the Nasdaq and S&P 500 to the Dow Jones and the Russell 2000. 

Expectations are now firming up that the likely victor in November will be Donald Trump, riding on his debate victory against a helpless Joe Biden, and building the myth as the miraculous survivor of an assassination attempt. The market is getting comfortable with the idea of Trump 2.0.

We’ve been focused for the last several weeks on emerging signs of weakness in the US economy, e.g. the rising unemployment level, but it’s fair to say that, while some sectors are struggling and the future is uncertain, the overall economy is looking robust. The International Monetary Fund’s (IMF) new World Economic Outlook projects the US economy will grow 2.6% this year. That’s down a tick from its earlier projection, but still double the anticipated GDP growth in the next-strongest G7 nation (Canada at 1.3%).

The IMF report described a global trend of services inflation proving harder to stamp out than seemed likely at the start of the year, resulting in fewer rate cuts from global central banks than had been anticipated.

In some advanced economies, especially the United States, progress on disinflation has slowed,” IMF chief economist Pierre-Olivier Gourinchas said. “Risks remain broadly balanced, but some downside near-term risks have gained in prominence… First there could be bumps on the disinflation path in advanced economies. This could force central banks including the Federal Reserve to keep borrowing costs higher for even longer. That could put overall growth at risk.” 

Nevertheless, the market is confident that the Fed will cut rates in September, possibly followed by rate cuts in November and December. 

The bottom line is that the global economy always faces risks, but for the moment, the US is doing well, and prospects of another Trump presidency do not seem to be worrying the market at all. 

Smaller stocks playing catch-up to Mag 7 (last 3 months)

Source: Google Finance