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Markets still robust amid global recovery
As a representation of the advanced economy, the US has shown a robust recovery after the global financial crisis in 2008.
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The economic indicators — in the US together with other major economies — indicated signs of recovery in the last decade. (Shutterstock/File)
T
he stock markets’ recent softness has not come as a surprise. According to the former chairman of the United States Federal Reserve, Alan Greenspan, a “bubble” had formed in both stock and US bond prices.
As a result, the optimism of investors, particularly fund managers in the center of global capitalism may have been jolted by the trauma of an economic regression. The fears started from data on US employment. A stronger US employment report in January this year failed to push up share prices.
In January, an additional 200,000 new jobs were created and the fastest growing wage increase in eight years was recorded, causing concerns among Wall Street investors. Firstly, the wage increases would reduce US corporate profits. Secondly, too strong a wage hike would drive inflation so that it would begin to creep up after a few years of low inflation, requiring the Fed to raise its fed fund rate faster than investor expectations. Thirdly, the development of the US bond market, the yield of the 10-year treasury, rose to 2.85 percent on the last Friday of January, the highest level in the last four years, compared to 2.4 percent at the beginning of the year.
However, no investor should be amazed if equity prices experience a fast recovery. The markets have recovered, heading toward new adventures, reflective of robust fundamental economic indicators. The mood supporting stocks is still commensurate with this economic progress, despite the current slide.
