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Europe and Asia economic issues
While the US economy is strong, there are economic issues slowing down Europe and Asia. These regions will soon begin to initiate their own version of quantitative easing. This mean that in the next few weeks the United States could see international money flowing in from European and Asian countries. This will continue the current debate about whether the US market is fairly valued.
Last week, retail sales reports came out better than expected. Because the US is much more of a global economy than it has ever been, investors need to pay close attention to what is going on in Europe and Asia, as it will have an economic impact here at home.
Three economic issues this week
This week we are watching three important issues. The first is the data that is coming out of China. The second is the meeting that the Fed is having to discuss interest rate hikes.
Standard and Poor’s has a report showing that historically, six months after a rate hike, the market will go up, on average, about 2.6%. Twelve months later the market will be up, on average, about 6.2%. It could be possible that over the next few months the markets trade back, but we believe that doesn’t mean the market is overvalued.
The third issue is Scotland voting to succeed from Great Britain. Pay attention to this as Scotland will be watched by other countries and their actions could become a trend.
Tax issues affecting the economy
One of our top five market drivers we’ve been watching all year is the government. We believe debate over US policy tax code will start to come out of the White House this week and go into the Senate. This debate will be about another tax increase and making the code more complex.
The Tax Competitiveness Index (TCI) shows that the US is not very competitive compared to the rest of the world. Out of 34 large industrial countries around the world, the US is TCI ranked at 32nd. This is encouraging people to buy companies in other countries outside the US. We are behind on tax competitiveness to other countries of which many liberal thinkers consider to be socialist, like Finland and Denmark. With midterm elections coming up, this will be a difficult debate.
Is there something in the markets that concerns you that we haven’t covered? Send us your comments by emailing me here or call me at (205) 989-3498. I would be delighted to talk with you.
Greg Powell, CIMA
Franklin Bradford, CMT
Senior Vice President
Ashley Page, JD, MBA
Senior Vice President
fi-Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. fi-Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The S&P 500 index is a measure of performance of the broad domestic economy through 500 stocks from major industries. The NASDAQ Composite represents all the stocks that trade on the Nasdaq. The Dow Jones Industrial Average measures the average price of a group of 30 high value stocks.