It’s another matter how long it will last, but the oil price reacted positively to the news and fell to the same level it was at before the Israeli strikes a couple of weeks ago:
Source: Trading Economics
In Asia, buoyant gains in stock markets due to the news, and gains are also expected in Europe and the United States based on futures (at the time of writing, S&P 500 +0.84% and Eurostoxx 50 +1.2%)
Powell believes there is no reason for interest rate cuts because “the economy is strong,” even though the average citizen is waving a white flag as a sign of surrender.
Powell and many others are mistaken by looking solely at the unemployment rate;
when looking at “Civilian labor force” and “employed,” it doesn’t look very good.
US consumer confidence is also reflected in the consumer confidence index, which unexpectedly declined after showing a slight sign of recovery last time:
In surveys, consumers are most concerned about tariffs and rising prices. Employment expectations also weakened, and the employment outlook for the next 6 months is weak.
Henri Huovinen has written, among other things, about the current investment environment and the importance of portfolio allocation.
Investors should not try to eliminate uncertainty, but rather build their portfolio to withstand it. The most important thing is to stick to the plan and ensure that one’s investment strategy is aligned with long-term goals – even when the world feels uncomfortable. It is precisely then that the best opportunities often arise.
I wrote a Premium article on European economic growth and the significant increases in defense spending made early in the year to stimulate the economy. However, in the article, I also considered the matter from another perspective: Europe is still slowed down by its self-inflicted structural and regulatory obstacles.
Some thoughts from the perspective of European stock exchanges, without revealing all the article’s contents:
Fiscal stimulus will provide a boost to the economy in the short term (1-5 years):
The EU’s 800 billion euro rearmament program (includes, for example, the common debt and reduced regulation that have been in the news)
New defense spending target (Defense spending/GDP ratio) of 5% (previously 3.5%), of this, 3.5% directly to defense and 1.5% to other security of supply, e.g., infrastructure
Germany, as a model country, has set an example and lifted its foot off the debt brake and proposed, for example, a 500 billion euro infrastructure fund project and 46 billion euros in tax cuts
Not only the defense sector benefits from these, but also many other companies in their supply chains. Rising spending on infrastructure also benefits many different sectors.
However, the aforementioned measures do not solve the long-term problem, and much remains to be done to ensure competitiveness. Also, for the development of European stock exchanges, it is essential that, for example, the following obstacles are dismantled (source: Mario Draghi’s report):
Internal trade barriers (e.g., bureaucracy in logistics). These mean up to 44% additional costs for European companies in manufacturing and 110% additional costs in service sectors (these are discussed in an FT article, which mainly refers to an IMF report)
Partly for the reason mentioned above, EU exports have had to grow from 31% to over 50% in the 2000s, increasing dependence on consumption by others. The remedy for this is to increase domestic consumption in the EU.
Structural weakness in productivity. The EU has far fewer high-tech companies than, for example, the United States. The technology sector is more productive than, for example, traditional industry. Part of the reason for falling behind has been the chronically low research and development expenditures of European companies.
Due to weakened competitiveness and a fragmented capital market, raising financing, especially for early-stage companies, is more difficult. This is a topic in itself, but it is absolutely essential to have a functioning capital market where good ideas that need money can efficiently find funding from investors. If this is not the case, those high technologies will move elsewhere, as has been seen. Therefore, we truly need a unified capital market.
Good text! I would add the following points to the reflections:
-Of course, a dark shadow over Europe’s rise is Russia’s incomprehensible actions in Ukraine and the eastern neighbor’s potential continued aggressions elsewhere in Europe. There is no limit to the madness in the Kremlin.
But on the other hand, there are many opportunities:
-The USA’s challenging nature. A country that has become unstable and unpredictable is no longer such an attractive investment destination, and thus Europe’s relative position improves. Even for top talent, the USA is no longer the obvious number 1 destination.
-The “smartening” of regulation. The aim is not maximum regulation, but neither is it reckless deregulation. It is important to remember that, for example, there is no single market without common rules and consumer demand only exists for safe products.
-The EU is currently negotiating numerous trade agreements (e.g., Australia, India, South America, Thailand, the Philippines, and much of the rest of Asia) and the upcoming eastern enlargement to the Balkans and Ukraine will significantly expand the single market.
-The clean green transition brings significant new demand. Despite all the social media and tabloid buzz, large investments are being made in the sector, from data centers to electric boilers.
-Last but not least: Europe has been put under such pressure between Russia and the USA and by China’s industrial steamroller that it is forced to pull itself together.
For example, Poland’s truly phenomenal economic rise or Sweden’s incredible innovation and industrial capability show that it is indeed possible here too, when there is a will.
Do you interpret the image to mean that from 2000-2007, value stocks performed better than growth stocks, and from 2008 onwards, growth stocks would have been a more profitable investment? It would be interesting to see this image over a longer period.
And was 2012 the right time to switch to owning large-cap companies?
I don’t understand the scale of this image. Bilello says that US stocks have outperformed non-US stocks for over 16 years.
That illustrates the ratio between the S&P 500 and MSCI World ex USA indices. The absolute scale doesn’t matter. At the bottom, the ratio was about 0.33, and now at the peak, it’s about 1. So, the S&P 500 has grown 3 times more than developed markets ex USA in 16 years.
, recession risks 
and geopolitics 
. Phew! These themes have been discussed 
during the beginning of the year and there have been plenty of rapid turns. A comprehensive situation report on the economy in the thread below 
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#economy #investing https://t.co/j67qRfLrhp by @JariHnnikinen1(Jari Hännikäinen) | Twitter Thread Reader