The U.S. is good and the rest of the world is not so good

March 9, 2016 9:34 AM0 commentsViews: 19604

The U.S. is good and the rest of the world is not so goodThe U.S. economy appears to be in good shape, with recent data on manufacturing and employment improving.

But the US and its markets remain under threat from the rest of the world.

“A critical story for the stock market and also for the economy and for the Federal Reserve for quite some time has been that the U.S. is good and the rest of the world is not so good,” said Deutsche Bank’s Chief International Economist Torsten Slok.

Of particular concern is China, the world’s second largest economy, which has been slowing.

China’s National People’s Congress got underway last weekend, with policymakers pledging to spend more money in their efforts to avoid a “hard landing” as GDP growth decelerates. All of this has important implications for emerging markets that export to China and to the U.S. market, according to Slok.

One of the items hindering growth in the second largest nation? Wages have increased significantly in China over the last 15 years while US wages have remained relatively stable. In other words, the cost of manufacturing goods in China is on the rise. This is incentivizing companies to move their production out of China to other low-cost countries.

Meanwhile, the market is trading in anticipation of Thursday’s European Central Bank meeting, which is widely-expected to issue further stimulus measures as it aims to bolster the lackluster eurozone economy.

The bottom line: The economy right now reflects a stark contrast in U.S. economic stability and international economic weakness, but the future of the U.S. markets may ultimately be determined by actions of international players.


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