Even if you buy US malaise—is it a good enough reason to shun global stocks?
Probably not. Despite a few soft spots, from Europe to Asia, the global economy doesn't look to have slowed overmuch.
Health on broad scales can continue, even as specific regions or countries play leapfrog. Global investors need not play that game.
Fueled by a worried Fed and a lackluster August for stocks, the US double-dip debate continued Tuesday. We don't think a US economic slowdown is necessarily strange and even wonder if it's so slow right now. But if you buy US malaise—is it a good enough reason to shun global stocks?
Could be. But first you've got to get a handle on what's going on outside these borders. Countries report data when it suits them, so we get a hodge-podge of news bit by bit—perhaps forgetting what came before or missing it altogether in the info onslaught. Here we'll tabulate some Q2 notables. Not everyone has reported and not every country will be accounted here, but despite a few soft spots, the global economy doesn't look to have slowed overmuch.
First Europe, so recently mired in sovereign debt doubts. The British economy (not on the euro, but linked nonetheless) recorded 5% quarter-over-quarter (q/q) annualized growth in Q2—the best since Q1 2001. Despite the debt crisis, the eurozone's preliminary Q2 GDP added 4% q/q annualized—a rate unmatched since 2006. Some eurozone countries outshone others, but Greece's was the only economy to shrink (no surprise there). Germany emerged as a formidable regional economic driver. Q2 German GDP jumped 9% q/q annualized, the top quarterly growth since reunification in 1990. (And more positive news Tuesday: German unemployment declined for the 14th straight month in August.)
Further east, Asia continued along its steep growth trajectory. South Korea beat expectations with 7.2% year-over-year (y/y) growth in Q2. India's economic pace accelerated to 8.8% y/y in Q2, its fastest since 2007. A gaggle of smaller Southeast Asian countries were solid too—less consequential separately, but more significant when viewed together. Taiwan (off a newly minted free trade pact with China) posted 12.5% y/y growth in the second quarter. Also opening trade with China in 2010, ASEAN (Association of Southeast Asian Nations) countries Thailand, Indonesia, Malaysia, and the Philippines beat expectations with 9.1%, 6.2%, 8.9%, and 7.9% y/y growth respectively in Q2.
A couple months ago it was the US beating growth expectations, and Europe was the global problem child. Now that concern is reversed—and with it the lion's share of the attention. So it goes with our interconnected yet individually varied global economy. Health on broad scales can continue, even as specific regions or countries play leapfrog. Global investors need not play that game.