Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19
Is There a Stock Market Breakout Ahead? - 6th Nov 19
These Indicators Aren’t Putting to an Economic Resurgence - 6th Nov 19
Understanding the Different Types of Travel Insurance - 6th Nov 19
The Biggest Gold Story Of 2020 - 6th Nov 19
Best Money Saving FREE Bonfire Night Fire Works Show Sheffield 2019 - 5th Nov 19
Is the Run on the US Dollar Due to Panic or Greed? - 5th Nov 19
Reasons Why Madrid Attracts Young Professionals - 5th Nov 19
Larger Bullish Move in USD/JPY May Just Be Getting Started - 5th Nov 19
Constructive Action in Gold & Silver Stocks - 5th Nov 19
The Boring Industry That Hands +500% Gains - 5th Nov 19
Stock Market Chartology vs Fundamentals - 4th Nov 19
The Fed’s Policy Is Like Swatting Flies with Nuclear Weapons - 4th Nov 19
Stock Market Warning: US Credit Delinquencies To Skyrocket In Q4 - 4th Nov 19
Stock Market Intermediate Topping Process Continues - 4th Nov 19
Stock Market $SPY Expanded Flat, Déjà Vu All Over Again - 4th Nov 19
How To Buy Gold For $3 An Ounce - 4th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Why U.S. Econcomy the Bears Are Wrong…Again

Economics / US Economy Aug 09, 2012 - 11:17 AM GMT

By: Yiannis_G_Mostrous

Economics

Since the beginning of the year, being bearish and trashing the global economy has been the favorite pastime for the majority of market observers. Recurring negative themes have been the sluggish US economy, the supposedly imminent demise of the euro and the slowdown in growth of China’s gross domestic product (GDP).


Let’s debunk today’s “Chicken Little” attitudes, one by one.

The US economy is steadily (if not spectacularly) growing; the market certainly is more optimistic than the pundits. The S&P 500 index has gained around 10 percent so far in 2012 and another 3 percent to 5 percent upside for the rest of the year can’t be ruled out.

To be sure, the so-called “US fiscal cliff” of tax hikes and budget cuts that loom on 2013 is a clear longer-term danger for the US economy. However, employment is holding up, albeit at a disappointing pace. If jobs growth is sustained, it should facilitate future income growth. 

Meanwhile, from a macro perspective, the key for the future of the US economy is the country’s increasing energy independence. 

Earlier in the summer, ConocoPhillips (NYSE: COP) CEO Ryan Lance said that North America could be self-sufficient in oil by 2025. If true, this development would improve the US trade balance and boost GDP growth.

Robust domestic production of natural gas is also pushing down gas prices, a big positive for consumers. Lower energy prices will allow the US economy to re-industrialize, adding another dimension to its grown potential.

Major European companies are already opening or planning to open new factories in the US, to take advantage of this energy sufficiency and lower prices.

As for Europe, my view remains that the markets are gradually pushing the leaders of the euro zone to act more decisively in resolving the Continent’s sovereign debt crisis. Although the EU still faces many daunting long-term problems, the crisis is easing over the short term.

Greece continues to be a basket case, but Italy is now running a trade surplus and Ireland a significant current account surplus. Spain also seems to be on the right track in fixing its economy.

Remember that the problem in Europe is not the size of the debt but rather its distribution. Some countries have more debt than others. As a whole, EU’s primary budget is a quarter of US levels, the total amount of debt is below Japan and the UK, while the current account is in balance.

As for China, it’s true that the country’s “go-go era” of double-digit GDP growth is over, but its economy will continue to deliver growth of about 8 percent for the foreseeable future—a pace that most countries would envy.

Although the Middle Kingdom must grapple with many long-term challenges, investors should shun the overly pessimistic notion that not only the country’s economy but also its society is on the brink of disaster. For now, my view remains that the Chinese economy will deliver solid growth this year, especially if the infrastructure projects originally scheduled for 2012 are firmly back on track and residential property recovers in the second half.

The upshot for investors? Staying with equities for the rest of the year will prove to be a profitable bet.

I especially like banks with large emerging market footprints such as UK-based Standard Chartered (London: STAN); energy stocks such as Italian-based ENI (NYSE: E); and well-managed insurance companies such as German-based Allianz (OTC: AZSEY). Value hunters should look at European big-cap pharmaceutical companies such as Sanofi (NYSE: SNY); well-positioned food retailers such as Ahold (NYSE: AHONY); and innovative software suppliers with huge growth potential, such as SAP (NYSE: SAP). For more Asian stock picks, check out Best Asian Stocks to Buy Now.

By Yiannis G. Mostrous
Editor: Silk Road Investor, Growth Engines

http://www.growthengines.com

Yiannis G. Mostrous is an associate editor of Personal Finance . He's editor of The Silk Road Investor , a financial advisory devoted to explaining the most profitable facets of emerging global economies, and Growth Engines , a free e-zine that provides regular updates on global markets. He's also an author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity .


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules