3 Stories in the global economy that should not go un-noticed
In keeping with the start to 2014, stocks were volatile on the week as investors struggled to make sense of conflicting economic data and Federal Reserve intentions. U.S. equities registered their largest one-day decline in two months on Monday, feeling the hangover effect from the previous Friday’s surprisingly lackluster jobs report.
Meanwhile, historically dovish Atlanta Fed President Dennis Lockhart further roiled markets by seeming to support more tapering of the Fed’s monthly bond-buying stimulus. Even though incoming Fed chairwoman Janet Yellen has long espoused a philosophy of accommodation, the uncertainty surrounding the Fed’s exit strategy and upcoming leadership transition has contributed to this year’s volatile beginning on the market .
For the week, the S&P 500 lost 0.2%, the Dow gained 0.13%, and the MSCI EAFE (developed international) rose 0.14%.
Here are the 3 stories this week that rose above the noise:
World in 2014 Is Better…But Not Good Enough
PIMCO Co-CIO Mohammad El-Erian is more optimistic about the global economy in 2014, citing improving economic growth in developed economies, lowering global unemployment rates and strengthened financial regulation.
Despite many signs that global economic growth is strengthening, El-Erian lists several risks that the global economy faces in 2014, including transitioning U.S. Federal Reserve policy, political dysfunction in Washington, sluggish growth accompanied by elevated unemployment in Europe, and global economic growth unable to reach “escape velocity” five years after the financial crisis.
OECD Leading Indicators Point to Pick Up in Global Growth
Growth is set to pick up in most large economies during the first half of 2014, with the exception of India, which is set for a slowdown, according to leading indicators published last Monday by the Organization for Economic Cooperation and Development.
The Paris-based research body's leading indicators suggest that the outlook for many parts of the global economy improved as 2013 drew to a close. The leading indicators for Brazil and China also rose, indicating both will experience an increase in growth over coming months.
U.S. Small Business Confidence Rises; Firms Expect More Sales
U.S. small business confidence rose in December, driven by increased optimism about revenues and an improving outlook for business conditions over the next six months. The Small Business Optimism Index is still below pre-recession levels, but has trended higher over the last year.
Overall, the report was encouraging. The outlook for small business spending is also improving according to National Federation of Independent Business economist William Dunkelberg. “Reports of capital spending did rise significantly in December...and plans to make expenditures did rise a bit.”
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
