Momentum in the stock market continued in March. The MSCI World global stock index in euro terms rose 0.5%.
The stock market was characterized by violent optimism at the start of the month because of announcements from the Federal Reserve. Subsequently, optimism has slipped slightly in the background, especially in the bond market where a scepticism is gradually thriving on whether Trump's campaign promises will materialise. This is probably partly because it was not possible to abolish Obamacare/ACA and find a worthy replacement that would be acceptable to the Republican-dominated Congress. As described in last few monthly reports, we have seen a greater number of months with continuous improvements in macroeconomic data. Some surveys (both from businesses and from consumers) surpassed the previous highlights from the financial crisis, and it starts to resemble optimism.
I maintain that there is a strong momentum in the global economy right now, and very good reason for the newfound optimism. Several years after the financial crisis, consumers and businesses have become accustomed to half-depressive economic conditions, with both the labor market and general market opportunities. Surveys are showing a dramatic improvement in expectation levels right now.
My assessment is that this is because consumers and businesses are pleasantly surprised by even a slight bit of better-than-average growth.
Against this backdrop, I do not think one should be surprised if the macroeconomic indicators will improve even further in the coming months – until the summer. The leading indicators for the US, Eurozone, Japan and China are still pointing upwards, which indicates that growth figures will improve further towards summer. Currently, there is no indication of overoptimism, but as the economy after the summer of 2017 decelerates slightly, one should also expect that the survey data and other indicators will land on a more normal level.
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