By Graham Summers, MBA | Chief Market Strategist
Outside of the U.S., the world economy is in serious trouble. Europe is teetering on the verge of recession with its collective economy barely growing for three quarters in a row.
Germany, the largest most dynamic economy in the EU has only just established a new high in its stock market. This is shocking when you consider the European Central Bank (ECB) has already cut interest rates by nearly 1%! Put another way, European stocks are struggling despite that region’s central bank already aggressively easing monetary policy!
Elsewhere in the world, China just “blinked” by cutting rates on reverse repos and injecting liquidity into its financial system. The problem here is similar to in Europe: economic weakness.
Chinese equities have gone nowhere since late 2022. In a financial system that relies heavily on asset prices for political stability, this has been a disaster. Chinese policymakers are finally acting in the hopes of breaking the downtrend.
Japan has a strong stock market… at the expense of a collapsing currency. The Yen is trading at levels not seen since the early ’90s. The global financial system experienced its first “ripple” from this situation in early August when stocks nose-dived as the Yen erupted higher on an intervention.
This leaves the the U.S. as the sole major economy chugging along with GDP growth of ~3% and a stock market that hit new all-time highs on a regular basis for six months.
A lot is riding on Uncle Sam’s shoulders. Does he have what it takes to keep the world from rolling over into recession?
