3 Stories in the global economy that should not go un-noticed
Markets have been volatile in the last weeks of the 3rd quarter, roiled by renewed budgetary debates in Washington as Congress struggled to approve a 2014 budget before yesterday’s deadline. The US Government is currently closed for business.
Markets finished last week slightly down—the S&P 500 fell 1.06%, the Dow lost 1.25%, and the Nasdaq increased by 0.18%.
Here are the 3 stories this week that rose above the noise:
Is the Pump Primed for Emerging Markets Investors?
Emerging market equities have significantly underperformed the developed world over the last year due to global growth concerns and geopolitical tensions. However, we have recently seen a reversal of the prior trend. Mark Mobius, an emerging-markets fund manager at Franklin Templeton Investments, provides the following commentary supporting investing in this area.
Currency appreciation, fiscal strength (lower debt/GDP), growth prospects, and global economic recovery and monetary expansion highlight Mobius’ list of bullish arguments favoring emerging markets. “I’m not saying everyone will or should increase their allocations to emerging markets, but I think that many could very well rebalance their portfolios as market sentiment should improve.”
After the Shutdown, What Can We Expect?
With a government shutdown upon us, it’s worth pondering this drama’s endgame. Does anyone seriously think Democrats in the Senate or the White House will abandon the president’s signature legislative accomplishment in order to appease a few dozen congressional Republicans with an appetite for hyperbole?
An op-ed from Bloomberg reviews some of the aspects of the U.S. government shutdown. Many pundits believe the shutdown will have a limited impact as long as it is short-lived. History supports this conclusion as the S&P 500 fell only 3 percent-4 percent during the shutdown of 1995-1996 and eventually went on to rally considerably further.
Consumer Spending in U.S. Climbs 0.3% as Incomes Pick Up
Consumer spending increased for the fourth consecutive month in August, rising by 0.3 percent according to the Commerce Department. The modest gain in consumer spending was supported by a 0.4 percent gain in personal income, the largest improvement in six months. Consumer spending, which accounts for roughly 70 percent of the economy, will need to advance at a faster pace in order for the U.S. economy to break out of its four-year trend of slow economic growth.
Negatively, consumer confidence contracted in September, which provides an additional headwind for consumer spending. Additionally, the government shutdown will most likely negatively impact household spending if the shutdown lasts for a prolonged period of time.
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
