Markets have been surprisingly robust since the lows of late December despite signs that global economic growth has been moderating since 2017. While there have been some positive stimuli over the intravening period, the overall trend has been for successively lower estimates of GDP growth. The US markets have been buoyed by the tax reductions in 2018 that have contributed to strong earnings growth which have been used to finance share buybacks and dividend increases. Little has been spent comparatively on capital expenditures to support future operations. Wage gains and employment have also made some progress in the US. The Eurozone has been less buoyant as the Brexit fiasco continues to play out and trade wars take their toll. The German economy has slowed at a faster rate than pundits pontificated while Italy actually reported a technical recession. While the Chinese economy continues to grow at a faster pace than the other developed economies, the fact that growth has been slowing has large implications for its trading partners given the size of the economy. The ongoing trade fight with the US does not bode well for China’s economy particularly at a time when they are attempting to rein in excessive debt levels locally.
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