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World Economy: Best in Years

By Shlomo Maital

The recent one-day dramatic drop in the US stock markets, about 6%, has brought panic to investors – especially to every-day ones who manage their 401K accounts. It embarrassed President Trump, who speaks daily of the booming stock market and the “$8 trillion in new wealth” that it has created.   He has ignored the drop, and his spokespersons revert to speaking about the strong economy.

   So here is the basic truth.   The global economy, for the first time in over a decade, since the onset of the global financial crisis of 2007-8,   is expanding everywhere – United States,   Europe, Asia.   This synchronous expansion is of course amplifying economic growth and employment and job creation in each of the three key regions.

   The graph above, from Ifo Munich, shows “actual” on the x-axis and “expectations” on the y-axis, for the EU region, which is about the same size as the US economy.   It indicates that the EU economy is squarely in the upswing upper right quadrant, after a very long time being remote from it.   The economy is growing, and people expect it to continue.

     I hope small investors do not panic and bail out of their stocks, giving unwarranted profits to the sharks, and that they take into account this global synchronous acceleration, which I think will continue for a while. I hope also nobody will attribute this to what politicians, including Trump, are doing or have done.   This is simply a cyclical pattern, as people and businesses expand their spending after years of belt tightening.   It will end some day — but hopefully not too soon.      

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Blog entries written by Prof. Shlomo Maital

Shlomo Maital
February 2018
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