Global Markets

Positive results drive strong US data

04 July, 2014 | Posted By: Oren Laurent

By Oren Laurent
President, Banc De Binary

A month ago, I said in this very column that U.S. economic data was conflicting, albeit with an overriding bullish sentiment. Now it seems that the bulls are leaving no room for doubt as the economy continues to pick up pace.
At the close of last week, the Standard & Poor 500 Index was just one trading day away from celebrating its longest stretch of quarterly advances in 16 years, after reaching an all-time high of 1,962.87 on June 20. Among the soaring American Stock prices, Netflix and Facebook both advanced more than 12% during the quarter, and energy companies in particular saw tremendous gains amid the unrest in Iraq and the Ukraine, and the resulting concerns about oil supply.
So what’s driving results? Recent data releases have been consistently positive, from employment to housing data. Indeed, it is the fact multiple sectors of the economy are thriving that has created the optimistic market outlook. For Janet Yellen, the Fed Chair, it is the combination of an accommodative monetary policy along with rising property and equity prices, and the improving global forecasts, that will lead to above-trend growth.
Admittedly, you could point out the fact that yields are falling globally which is putting pressure on U.S. interest rates. You could remark that policy makers at the central bank are busy debating how long to keep the borrowing costs low, and just 2 weeks ago cut the long-term target interest rate estimate from 4% to 3.75%. Yet, looking at the wider picture, these facts do not override the mounting evidence to suggest that the U.S. economy is rebounding. I would argue that the first quarter contraction and rippling impact of the terrible weather now seem to be firmly behind us.
Upcoming data releases are expected to affirm the current bullish outlook. Banc De Binary’s analysts are predicting that the NFP employment data release on Thursday will reveal that American firms are continuing to hire steadily. If correct, this could be the fifth consecutive month of job gains exceeding 200,000, a loud and clear sign of economic growth. Additionally, forecasts for the important ISM manufacturing reports suggest accelerating growth, which would be attributable to rising trade and investment.
At a time of ongoing political turmoil in the Ukraine and across the Middle East, investors have good reason to be cautious. However, the world’s largest economy seems to be as strong as we can reasonably expect. While short-term traders ride the bullish waves of the upcoming data releases, long-term investors should keep a close watch on the unfolding global events, but can at least be reassured that for now, stocks and indicators of growth are steady.