US Market Still a Global Leader


John Stephenson Image John Stephenson President and CEO, Stephenson & Company

At least through the first month of 2013, the US economic and market picture looks the most promising, asserts John Stephenson of Strategic Investor.

Stock markets are off and running in 2013, with the S&P 500 already up 5.4% so far this year, closing above 1,500 points, its highest level in more than five years.

Investors are expressing increasing confidence about global economic prospects, which is evident in declining US equity correlations and low volatilities. Commodity prices have also firmed, with Brent crude closing above $113 per barrel as Markit's advanced gauge of manufacturing activity in China hit two-year highs.

Sentiment has turned positive lately by better economic data from the US, China, and the Eurozone; fading US budget woes and the continued support by ultra-loose monetary policy from many of the world’s major central banks. Also supporting the rally is Japan, the world’s third-largest economy, which finally appears serious about reversing decades of lackluster performance.

The relative calm in the Eurozone has seen the euro appreciate against the US dollar, while hitting a year high against a weak sterling. With the UK bracing for a triple-dip recession, sterling is likely to remain under pressure for some time. There has only been one quarter of economic growth in the past five, and the UK economy is now 3.3% smaller than at the start of the financial crisis in 2008.

The kickstart that the British economy got from hosting the Olympic Games has all but disappeared. Figures released Friday by the Office for National Statistics (ONS) showed gross domestic product fell by 0.3% in the fourth quarter of 2012, compared with the previous quarter.