Why so far Global Stock Markets are Up ?

By Asseged Major

Global Stock Market Performances

​Globally Stock Market Performance has increased so far. On a Year-to-Year basis, major stock indices, of the US Stock Market (S&P 500) is up 19.59 %, the Japanese Stock Market (Nikkei 225) gain of 22.84 %, Germany Stock Market (DAX) gain of 27.01 % , France Stock Market (CAC 40) gain of 23.95 %. (Look at Figure A)

Global Stock Markets
(Performance Returns)

(Data : investing.com, 9/29/2023)                        Figure A 

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US Economy Beating Expectations

The US Economy has been over performing and doing better than market forecasts so far. The US Economy has experienced a Moderate growth environment with decreasing inflation. The US Economy has been Beating Market forecasts for each of the first 2 quarters. Economists and Forecasters were forecasting a flat to slight negative growth in the first 2 quarters. A sizable number of Economists and Forecasters were predicting a recession in 2023, that has become highly unlikely now. From the start of the year, the “ Wall Street Journal Economic Survey ” , median forecasts from Economists for the 1st Quarter and 2nd Quarter of 2023, were (+ 0.10 %) GDP Growth and (- 0.37 %) GDP Growth. The “Federal Reserve Survey of Professional Forecasters” median forecasts were (+ 0.2 %) GDP Growth for both quarters. The US Economy came in Beating Market Forecast by huge amounts at a full gain of (+ 2.2 %) in the 1st Quarter, and (+ 2.1 %) in the 2nd Quarter. At the same time, the US Economy has been reducing Inflation significantly, from the Nominal Inflation Rate 9.1 % (June 2022), to now 3.7 % ( August 2023), (Look at figures 1–2) . 

​The US Economy has been experiencing the ideal scenario from a Central Bank perspective like the Federal Reserve, while Raising Interest Rates, experiencing a reduction of the Inflation Rate with Moderate Economic Growth. The scenario of the so called “ Soft Landing ”, achieving the price stability to reduce the Federal Reserve target of the 2 % Inflation Rate level without a recession and significant job loss. There are definitely some mixed signs in the economy that also give a different picture, where some sectors in the economy may be experiencing recession effects and are contracting while other sectors are not. This is termed what economists call a “rolling recession.”  Sectors such as Freight and Manufacturing are experiencing similar effects. The August 2023 Jobs Report added 187,000 Jobs, but sectors in Transportation and Warehousing lost (-34,000 jobs),  the August 2023 ISM Manufacturing PMI Index value of 47.6 still remains below the Contraction threshold value for 10 consecutive months. Overall, the stock market has continued to increase in 2023 and for good reasons by investors as Economic data has come in with solid economic growth and beating expectations (Look at Figure 3 above). It is likely that the 3rd quarter economic growth will be the same or better than the first 2 quarters. 
​(Data : “wall street journal economic survey”, “federal reserve bank of philadelphia-survey of professional forecasters”, US Bureau of Labor Statistics, Institute of Supply Management)

​Europe Stock Markets

European Stock Markets have reached record highs, while countries in the region have been experiencing slow to flat growth. Currently the Stock Price levels are below their record highs by not far off. The French Stock Market, UK Stock Market, and German Stock Market all reached record highs in 2023 so far. (Look at Figures 4-7)

Euro Zone Consumer Confidence 

Euro Zone Consumer Confidence Survey had decreased for 2 months in a row. It made consecutive gains month after month, than starting a decline in August. For the month of September, it came in at (-17.8) (Look at Figure 8). Important to note that the Euro Zone Consumer Confidence Survey value is a negative value. Historically majority of the time the values in the Euro Consumer Confidence survey are in negative territory. This is the lowest value in 6 Months. It is below its long-term average. The decline in value represents a pessimistic sentiment that consumers in the Euro Zone have about the economy and is translated in there the decline in GDP Growth through consumption.  
​(Data: tradingeconomics.com|European Commission, theglobaleconomy.com|EuroStat) 

Germany Stock Market 

In the case of Germany, in the first 2 quarters it has reached negative economic growth for both quarters and falling below market forecasts  and yet the German Dax Stock Market is up positive with a 27.01 % Return (YoY), and 10.51 % Return (YTD). ( Look at Figures 9-10)

Global Stock Market Patterns

• Globally Stock Markets have performed as would be typically is the case in a normal economic  environment (exception of China),  where the US and major Foreign Stock Markets are up, and the US Dollar is down. Europe and Japan Stock Markets are up positive in gain, and Foreign Currencies are up in positive gain against the US Dollar, year to year basis, the US Dollar index is down -5.42 %, the Euro and Pound is up 7.89 % and 9.33 % against the US Dollar.

• The Euro Zone is currently in a slow to negative economic growth, China is currently by their historical standards are in a Slowing Economic environment, and experiencing disinflation , and mixed in with the headwinds from their Commercial Real Estate Property crisis. Japan Stock Markets have continued there gains due to interest rate differential's of easing monetary policy.

• The recent current retracement of US Stock Markets, which may have spread as losses into other Foreign Stock Markets, is the current fear from investors is the uncertainty of how long interest rates will remain high or continue to be raised by the Federal Reserve. This is more currently driven at the moment by market sentiment and emotion and can be advantageous for an investor on either side of the market.

• Overall, so far up to now it seems like the positive sentiment here in US Markets may have spread into the performance in major Foreign Markets. Given their economic environment, there is much less of a case for the Europe Stock Markets to proceed in this trend, than it is in the US and Japan Stock Markets. 
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(Data : investing.com, 9/29/2023)

​Disclaimer : 
Paraimbal, LLC is a registered CTA & CPO ( Commodity Trading Advisor and Commodity Pool Operator ) with the CFTC (Commodity Futures Trading Commission) and NFA Member. This content is for informational purposes only. This information is of the opinion of Paraimbal, LLC and Asseged Major. This information is not mean’t to be investment advice. This is not a offer to participate a futures trading program, or securities.