Now for the good news
There is good news. Partly it is derived from the obvious fact that the UK and the US (despite their own high debt levels) are not in the eurozone.
Partly it is because many nations (in Asia and emerging markets) have been deliberately trying to slow down their economies over the last year or so, and are now ready for a new upswing.
To begin with let’s see how this was reflected (or not) in stock market performances for 2011:
The US stock market performed a minor miracle, reflecting surprising economic stability late in 2011, albeit at a low level.
The US is vital to the world economy, but it is not an island, and there are a number of reasons to expect this not to last in the short term.
But taking a longer view, the US has some considerable advantages:
- in times of crisis the rest of the world wants to buy the US$ as a safe haven
- it enjoys a single currency, single market, fully functioning central bank and unfettered tax and spending (fiscal) powers
- the US population is not ageing as quickly as Europe and the UK
- US consumers and companies have already substantially reduced their debt levels
- having a Pacific coast provides a direct exposure to Asian growth trends
- the US housing market (the epicentre of the crisis in 2008) might now be stabilising
- the US is increasingly becoming energy self-sufficient
- last but not least, unlike the eurozone they can turn on the printing presses, and inflate away much of their debt in years to come
Now is not quite the time to buy the US. But on marked eurozone-triggered weakness, we will consider some more dynamic US funds.