Our thoughts and prayers are with the people of France and all they have been through this past week. We believe they can and will prevail.
Last week the markets ended in the red with all eyes on the Fed. Retail sales came in lower than expected. The markets need consumers to get off the sidelines and drive the markets over the next few months. Remember that consumer spending makes up about 70% of the market.
This week in the markets
Japan is officially now in a recession with negative GDP over the last two quarters. This effects US markets and investors as Japan is a large part of our global economy. This week we will continue to watch the Fed while we wait for reports on inflation, manufacturing, and the Federal Reserve minutes which will be released on Wednesday.
The G20 Summit has helped the global economy
The G20 Summit will be popular in the press this week as it began yesterday in Turkey. The G20 is made up of the top economic countries in the world. During the 2008 financial crisis the G20’s first response was to come together on a monetary policy in 2009, which was very effective in bringing about global economic growth. In the following years the IMF hampered this growth with their policies. In 2013 the G20 responded with policies that were more of a micro/fiscal direction in order to keep the global economy moving. They committed to spending $2 trillion on infrastructure to add on to the good result from their monetary police of 2009. Unfortunately this has not had as good of results for political reasons.
A lack of ammunition for the global economy
This G20 Summit will be interesting to watch as we believe the leaders are running out of policy ammunition. The debt balances on the G20 countries is much higher than before because of their financial involvement in 2009 and 2013. Therefore, their willingness to go forward with more financial commitment will be limited.
Since 2009 the emerging market countries have really been the ones to lead us out of the financial crisis through infrastructure spending. This is largely due to the fact that these countries had budget surpluses at that time. Now they are all running deficits around 4% of their GDP. While this is not big compared to the United States, it’s big for them. Now they will not be as willing to help aid global economy.
The Syrian refugee crisis compounds all this because of its strain on European budgets. This increases the unwillingness of European countries to contribute to more G20 policy because they are already in debt. We will be watching to see what the G20 can come up with considering the reality of this debt and already implemented monetary policies.
Of course, the tragic events in France with be another big topic for the G20. Beyond that, there is much they need to discuss and figure out as the global economy is cluttered with many critical issues that impact us all.
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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.
Economic forecasts set forth in this presentation may not develop as predicted.
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