Global headwinds such as growth issues in China, crashing commodity prices and volatile oil prices had kept international markets at its toes for a while. With China and oil playing foul, global growth prospects remained clouded, dampening investors’ confidence. This was evident from the massive sell-off in the early part of this year.
Moreover, the Central Banks had little room to work with some countries even deploying a negative interest rate policy and economic data displaying some eerily similar patterns that led to recessions in the past. All these pointed to a global recession in 2016.
Why Things Look Greener Now
Though persistent slowdown in the world’s second largest economy and a relentless slide in crude oil intensify fears of a global slowdown and deflation, the U.S. stock market has shown some recovery in the past one month amid heightened uncertainty. The S&P 500 index gained over 7% in the past one month.
Moreover, the U.S. economy has regained momentum after a sluggish fourth quarter, given the slew of encouraging data pertaining to retail sales, consumer spending, producer prices, factory production and inflation. The recent strong jobs data further eased fears of a recession in the U.S. and infused signs of confidence into the economy.
While tepid wage growth remains a matter of concern, a solid hiring number is strong enough to support the Federal Reserve’s gradual interest rates hike this year.
U.S. Bull Run Celebrates 7th Birthday
To top that, the U.S. stock market finally completed its seventh year of “Bull Run” on Mar 9, despite persistent global hurdles. Though the S&P 500 index declined over 4% in its 7th year, it has risen 194% from the bear-market bottom of 676.53 on Mar 9, 2009. This is the longest Bull Run since the 1940s.
While consumer confidence is on the rise with increased spending power, a thriving auto industry, and a recovery in the housing market, the optimism is likely to continue as the bull market enters its eighth year, but with high levels of volatility.
“The more fun part of the bull market is probably over,” said Russ Koesterich, global chief investment strategist at BlackRock. “It doesn’t mean stocks can’t advance. But the gains are going to be more muted – and accompanied by more volatility.”
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