Despite the small pullback in equities today the momentum is higher on the US stock market, golden cross and all. Below is a chart that Andy Lees of UBS put up in his morning note today. It shows that we are now back above "the Lehmans level."
There are risks here, though. Andy writes:
The Fed is obviously looking to reflate the world, and whilst it will undoubtedly be in a piece-meal approach, they will keep throwing ammunition at the problem. It is a much larger problem than in the 1970’s in the sense that the US debt is so much larger. There is also less of a transmission mechanism in that in the 1970’s the US was only just turning importer of energy and so it was relatively isolated, but nevertheless its terms of trade for resources are far better than in Asia.
Andy goes on to say that, in the 1970s, European and Japanese consumers could take the baton of global growth from the U.S. Contrast that to today where it is questionable whether the Chinese can do so. The emerging markets have de-coupled into a higher growth track for now. However, in the event of a further weakening in the US. this de-coupling will prove illusory. In my view a sustained cyclical bull market is still dependent on the US consumer.
