Keeping an eye on the bigger picture at Enable our Independent Financial Advisors often look across the pond to inform our wealth management approach. We followed the US on the way down perhaps we will follow them on the way up. Since the October 2011 lows, the S&P 500 is up very strongly, and both the unemployment and housing picture appears to be improving in the US.
Nothing goes up in a straight line and it would not be sensible to assume that a smooth upward trend would continue indefinitely. Despite the current positive signs, oil price fluctuation, the prospects for China, and the decelerating of US earnings growth and profit margins must all be taken into consideration when discussing the sustainability of the US recovery.
There have been concerns that oil prices in the US are high enough to break the economic recovery but it is important to remember that it’s the rate of change, rather than the scale of the price, that is more significant here. The job market continues to move in the right direction albeit at a slower rate more recently, a growing consumer confidence, a pick-up in credit growth, in addition to aggressive stimulus measures from the Fed – US consumers are now better positioned to weather volatility in energy prices.
It is also dependent on developments in the Far East. Fears of a hard landing for China’s economy, resulting in a drag on US and global growth, are widespread but possibly premature. China’s growth has certainly slowed, but a strong posting of 8.1 per cent growth in the first quarter of 2012 should calm immediate concerns.
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