Moving On Up…

As we come to the close of summer, equity investors around the world have enjoyed stock markets which have not suffered from the “sell in May and go away” syndrome which has too oft’ marred an otherwise pleasant vacation.  Exchanges have continued to march forward and portfolios have appreciated.  Why?







We think the above chart explains a lot.  For the first time in a long time, economies around the globe are growing together.  Low interest rates and fading global crises are probably responsible.  The International Monetary Fund (IMF) projects that world economic growth will be +3.5% in 2017 and 3.6% in 2018.  Such synchronized growth is rare.  Even long beleaguered Greece is slated to show progress this year.  Growth in the Eurozone was better than that in the US in the first quarter and was about the same as America in the second period of 2017.

Japan’s economy grew 4% in the June quarter.  China has kept “motoring along” well in excess of 6.5% and India’s economy has been growing faster than China’s.  As a consequence, corporate earnings and cash flow are up and better than what the “Street” was expecting.  Positive company surprises have underpinned markets – especially with interest rates as low as they still are. How long will this environment last?  Interest rates would have to rise quite a bit before bonds would represent real competition for investor capital.  The Fed funds rate is rising in the US – so this cannot be ignored, but watched. Employment around the world is going up, yet inflation is still not a worry to most central bankers.  Consumer sentiment is strong. Investor sentiment is strong.  Outside of politics, investors are ending their summer as a pretty happy crew.