Global Market Believes Again

01/16/2014 9:30 am EST


Jim Jubak

Founder and Editor,

Retail sales numbers for December were announced and it seems like US growth enthusiasm has come back, says MoneyShow's Jim Jubak, but he wonders if it will last.

Global financial markets were believers in growth again yesterday.

Tuesday, what the headlines are calling “solid” (but I'd call tepid) retail sales growth in December, reassured investors and traders that the US economy wasn't about to slow down. (That was last week's fear, after all.)

And yesterday, we had new forecasts from the World Bank (echoing comments from the International Monetary Fund) for higher growth in the global economy in 2014.

On the return of optimism about economic growth, the US Standard & Poor's 500 Index (SPX) was up 0.53% as of 3:00 PM New York time. The German DAX (IX:DAX) finished the day up 2.03%. And the Japanese Nikkei 225 Index (NKY) closed up 2.5%.

Retail sales (excluding volatile auto sales) climbed 0.7% in December. That was the largest increase in ten months. Including autos retail sales climbed 0.2%. Economists had expected an increase of just 0.1% in December. Revisions took November's growth down to 0.4% from the previous 0.7%.

Other than the very real possibility that the miniscule beat for December came from sales pulled from the November revision, the story for holiday sales suggests the limits of the good cheer in these numbers. Holiday sales (excluding autos, gasoline, and restaurant meals) rose 3.8% in the 2013 holiday shopping period, according to the National Retail Federation. That was a higher growth rate than in 2012, it's true, but not by a whole lot. Holiday retail sales in 2012 grew by 3.5%. And, reports the Retail Federation, the holiday period saw heavy discounting that ate into profit margins. Exactly how big the profit erosion was won't be totally clear until we get reports from individual retailers during the fourth quarter earnings season.

The World Bank increased its growth forecast for the global economy to 3.2% in 2014. That's up from 2.4% in 2013 and marks a big increase from the 3% growth the World Bank forecast for the global economy in 2014, back in June 2013. Developed economies are the source of the higher forecast with the World Bank raising its economic projections for developed economies to 2.2% from the previous 2% growth, on improved growth in the United States, and Japan, and a bottom for Europe's economies.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did not own shares of any stock mentioned in this post as of the end of December. For a full list of the stocks in the fund see the fund's portfolio here.

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