That said, while I believe slow global growth will continue and remain below trend, the evidence suggests that the global economy is not on the cusp of another recession. Global economic measures, while admittedly suffering from relatively short histories, are suggesting that growth should remain positive. Both the Global PMI and Global Services PMI are comfortably in expansion territory, Bloomberg data shows.
On a regional basis, U.S. (IVV) leading indicators look solid, if uninspiring, and in Europe (EZU), recent manufacturing, sentiment and credit surveys are all suggesting further stabilization in growth. In addition, lower oil prices and lower rates should both help stabilize growth.
Market Realist – Even though the world (ACWI) seems to be under the spell of a low-growth period, an all-out recession may not be in the cards. The United States (SPY) in particular looks robust. The labor market looks strong, with unemployment currently at seven-year lows of 5.3%. Non-farm payrolls have been expanding at a rate faster than the five-year historical average. In July, 215,000 jobs were added to US non-farm payrolls. You can see this tend in the above graph.
The US economy (VTI) seems to have recovered from the slowdown we saw in the first quarter of 2015. While the economy grew by a meager 0.6% in Q1 2015 on account of the unusually cold weather and the West Coast Port Strike, it expanded by an impressive 3.7% in the second quarter.
Europe (VGK) also seems to be shaking off its cobwebs. It now looks on the path to recovery. Even though the GDP growth in the Eurozone (IEV) was sluggish at 0.3% in Q2 2015, other economic indicators paint a better picture. The Markit Purchasing Managers’ Index for August rose to 54.1, up from 53.9 in July. An estimate above 50 indicates expansion, while an estimate below 50 indicates contraction in the economy. Depreciating oil prices and a weaker euro are both helping the economy pick up speed. With the dust settling on the Greece crisis, the focus has now reverted to the European Central Bank’s easing policy. The massive QE program is likely to continue driving the economy and European equities.