March 29, 2011 by akhilendra
US recovery on the track
Commerce department in USA released their reports which are indicating the economical situation is improving with the time. This is the eighth month in the row when consumer spending has gone up. But due to increased food and energy cost, most part of that money went into covering them. Spending rose to 0.3 per cent after adjusting for the inflation. Another report suggested the sale in housing is picking up.
Recovery is not yet complete but these indications are good. There are analyst who feel that growth expectations are higher than the growth itself, but if it slowdowns a bit, recovery is on the track. Stock markets in USA have performed better in last few months.
But is it good news for the stock markets in emerging economies like India, Brazil etc. US economy is an extremely good trigger for the global economy and its recovery will help the global economical recovery. After the recent earthquake and Tsunami in Japan, USA economical conditions are very crucial for the global economy and stock market.
Last year when stock market in USA were not doing well, lot of funds from that market were diverted to emerging markets like India, China, Brazil, Russia etc. Now the economical prospective improving in the USA, these institutor investors may pull out their money from these markets and reinvest them in US markets.
In fact in the last few months, Indian stock markets have witnessed a lot of fund redemption from the markets and these funds get allocated back to the west. But at the same time, US economy will greatly help many Indian firms to grow and do well in their fields.
Indian stock markets have outperformed most of the global stock markets in the last year but this year has not been a good year so far. Investors have spent most of the time watching their stocks falling from the sky and shrinking portfolios. If situation is improving further in the western economies, emerging markets can see more fund withdrawal from these markets therefore some more fall whereas if situation continue to improve in the US economy, it is very positive news for the investors in USA.
In 2008, when USA was hit by the one of the most severe recession, stock markets were the biggest victim of the crisis. Many banks and financial institution went bankrupt and stocks of the most of the companies fell to all time lows. Housing prices are still not recovered to their old levels but as the sales is picking up in the sector; things will improve in housing also.
At the moment, everyone is focusing on vehicle sale figures which will be out soon. It will further indicate the state of the economical recovery in the world biggest market.
Leave a Reply