Diverging Economies Will Keep Driving Markets
Fiscal stimulus is powering U.S. household income and consumption. But Europe and Japan can’t seem to capitalize on a pickup in growth.
Not on the same path.
Photograph: Avalon/Hulton Archive/Getty Images
The divergence among economies, and the asset-price dispersion that has come with it, remains one of the key global issues for policy makers and investors this year. The phenomenon isn’t sufficiently appreciated, even though it has material impact on benchmark market relationships and leads to feedback loops between financial and economic influences. Yet it will continue to be important, defining not just the immediate future but also raising important questions about the kind of convergence that is likely to follow.
Global economic patterns, especially among advanced countries, tend to be dominated by correlation rather than divergence because of the depth of cross-border trade and financial linkages. This was the case during the financial crisis and its aftermath, and right up to the beginning of this year.