US Economic Resilience Sparks Global Optimism Amidst Challenges

The US domestic consumption emerges as the primary driver of growth, maintaining resilience in the face of a generally weak global economy.

US Economy Shows Resilience in Q4 2023

In the fourth quarter of 2023, the US economy showcased its robustness, with domestic consumption playing a pivotal role. The gross domestic product (GDP) experienced an annualized growth of 3.3%, compared with the third quarter. According to Guy Wagner, Chief Investment Officer of BLI, "Public spending and exports also contributed positively to growth, while business investment and real estate provided little support."

Eurozone Stability and Challenges

While the Eurozone's GDP remained stable overall in the fourth quarter, Germany experienced a decline of 0.3% quarter-on-quarter. Spain outperformed, achieving a growth of 0.6%, while Italy's GDP rose slightly, and France's stagnated. In China, weak household confidence, influenced by the persistent weakness of property prices, is affecting consumption levels. Expectations of more substantial public support measures from the Chinese government. In Japan, negative real wage growth poses a hurdle to economic acceleration.

Central Banks Maintain Interest Rates

As anticipated, the US Federal Reserve kept its key interest rates unchanged in January. Chairman Jerome Powell tempered expectations of an imminent monetary easing, indicating a potential rate cut from May at the earliest. In the Eurozone, the European Central Bank also opted to maintain its key rates.

"Although it estimates that the disinflation process is well advanced, it considers discussion of possible interest rate cuts to be premature at this stage."

Guy Wagner, Chief Investment Officer of BLI

S&P 500 Sets New Record

The stock markets commenced the New Year with favorable momentum, achieving new all-time highs. Wagner notes, "The continued publication of economic statistics confirming the slowdown in inflation and the resilience of the US economy" propelled various indices to unprecedented levels. The S&P 500 in the United States surpassed its early 2022 record, posting a 1.6% increase in USD. Japan's Topix rose significantly by 7.8% in JPY. However, the MSCI Emerging Markets index fell by 4.7% in USD, impacted by the persistent weakness of Chinese equities.

In terms of sectors, technology, and telecoms services led the way, followed by healthcare, while utilities, real estate, and materials faced a more challenging start to the year. The MSCI All Country World Index Net Total Return, expressed in euros, rose by 2.3% in January, reaching a new high by month-end.

As global economic dynamics continue to evolve, these insights provide a valuable perspective for investors navigating the intricate landscape of financial markets.