Stock markets rush all the way, oblivious to blind spots


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US economic hurdles A year and a half after the coronavirus health crisis, the economies of the United States and Canada have faced some hurdles. In the US, GDP growth in the first and second quarters of this year, at +6.3% and +6.5% respectively (quarter to quarter), looks very good, not far from the expected figure of +7.0% for the full year. Adopted by many analysts. But the third quarter wasn’t looking bright. Shortages in components and labor have reduced production across a wide area. With some major automakers, car assembly lines have temporarily stopped working because computer chips did not arrive from China as contracted. With major retailers, imported consumer goods do not reach the interior of the country due to ties at the ports. There is a quandary for container ships off the coast of California. The cost of shipping goods from abroad has risen dramatically. When companies turn to air as an alternative means of transporting goods, they find that there has not been enough capacity increase yet. Overall price inflation rose to +5.0% y/y. Wages also caught fire. They’re in my sights + 5.0% per year, hourly and weekly. But the biggest negative was the resurgence of the Corona virus, with the delta variable causing a fourth wave and a level of infections in August reminiscent of the previous peak months. One result was a blow to consumer confidence. The University of Michigan’s “sentiment index” fell to 70.3 from 81.2 the previous month. The current reading is lower than it was a year ago (70.3 vs. 74.1). Graph 1: “real” US GDP growth, “real” Y/Y & Q/Q after inflation-adjusted. Data source: Bureau of Economic Analysis (BEA) Graph: ConstructConnect. Canadian Economy Suffers from Sluggish Q2 GDP The Canadian economy has been more foresighted in reversing the dampening effects currently underway. After increasing GDP by +5.6% in the first quarter, the Canadian economy contracted by -1.1% in the second quarter. Again, a largely unexpected increase in C-19 was to blame, resulting in some restrictions being re-imposed, or more caution being exercised in reopening drives. Graph 2: Canada’s “real” GDP growth, Y/Y & Q/Q Data source: Statistics Canada Table 36-10-0140-01. Diagram: ConstructConnect. Stock markets pay no attention as Table 1 indicates, however, stock markets have none of that. They rule out questionable news and stay aware of what they think will be true. The four North American indices shown in Table 1 set new highs in August. The long-term dates (from January 1991 onwards) of DJI, S&P 500, NASDAQ, and TSX values ​​appear in charts 7-10 at the end of this article. A fifth North American index, the Russell 2000 (for companies with smaller capitals), had the largest annual increase among stock market indices worldwide, at 45.6% (see Chart 3 and Table 2). The iShares 100 Frontier Pre-Emerging Economies Index came in second to the Russell 2000 for year-over-year advance in August, up 33.8%. STOXX Europe managed to post year-on-year gains (+28.9%) that were almost identical to the NASDAQ (+29.6%) and S&P 500 (+29.2%). In terms of performance over a shorter period of time, the Shanghai Composite Index was on top, at +4.3% per month. China’s GDP growth this year is expected to be around +8%. China’s GDP increase for the first quarter of 2021 was +18.3% (not annually, but compared to the first quarter of 2020). The GDP result for the second quarter of 2021 (compared to the second quarter of 2020) was not as strong, but still noteworthy, +7.9%. In the first quarter of 2020, China’s GDP contracted by -6.8%, but the whole year is still at +2.3%, which is the only increase among major countries. Aiming to emulate the success of the Nasdaq, Beijing plans to create a new index for small and medium-sized companies, and small and medium-sized enterprises in need of venture capital. Finally, as a point of interest, the Toronto Stock Exchange, which has struggled to make significant headway over the past several years, has outperformed (although barely) the Dow Jones Industrial Average year-over-year as of the August close. TSX was +24.6% yoy to DJI +24.4%. TSX is being given new life by the improved prospects for the commodity markets. For the construction sector, higher demand for raw materials and their prices will lead to increased activity at the site. Historically, many projects that have reached “mega” status have been resource extraction projects. Table 1: Stock Exchanges – Performance of Major Indices – August 31, 2021 Sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers, Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters .Table: ConstructConnect. Chart 3: Stock Market Performance: The United States and Canada vs. the Rest of the World over the Year As of the month-end close, August 31, 2021 iShares is a website specializing in “exchange-traded funds,” or ETFs, operated by BlackRock Investments. LLC. Data source: “finance.yahoo.com” Graph: ConstructConnect. Table 2: Major Domestic and International Stock Market Indices – August 31, 2021 “Index symbols” are in parentheses. MSCI (formerly Morgan Stanley Capital International) is a leading provider of investment decision support tools, with indexes as one specialty. iShares is a website specializing in Exchange Traded Funds, or ETFs, operated by BlackRock Investments LLC. Data source: “finance.yahoo.com” Table: ConstructConnect. Chart 4: Performance of major stock indexes over the last 12 months Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE), and Reuters. Diagram: ConstructConnect. Chart 5: Performance of major stock exchange indices since the economic downturn in 2008-2009 Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (Tokyo Stock Exchange) Finance), and Reuters. Diagram: ConstructConnect. Chart 6: US Stock Markets – August 31, 2021 The latest data points are on August 31, 2021. The red vertical lines indicate the main February 2009 “lows” of the indices. Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Automated Quotations of Securities Dealers (NASDAQ), Reuters and Yahoo. Diagram: ConstructConnect. Graph 7: NYSE: Dow-Jones Industrials (30) Areas of gray shading indicate the stagnation of the previous two centuries (the “dot.com” crash in 2001 and the Great Recession from the first quarter of 2008 to the second quarter of 2009). The graph shows the month-end closing numbers. Latest data point on August 31, 2021. Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE), and Reuters Chart: ConstructConnect . Graph 8: NYSE: Standard & Poor’s (500) Areas of gray shading indicate the recession of the previous two centuries (the “dot.com” crash in 2001 and the Great Recession from the first quarter of 2008 to the second quarter of 2009). The graph shows the month-end closing numbers. Latest data point on August 31, 2021. Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE), and Reuters Chart: ConstructConnect . Chart 9: Nasdaq Composite Areas of gray shading indicate the stagnation of the previous two centuries (the “dot.com” crash in 2001 and the Great Recession in the first quarter of 2008 to the second quarter of 2009). The graph shows the month-end closing numbers. Latest data point on August 31, 2021. Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE), and Reuters Chart: ConstructConnect . Chart 10: S&P/TSX Composite Index: Gray shading area on the Toronto Stock Exchange indicates Canada’s early recession in the current century (Q4 2008 to Q2 2009; no “dot.com” crash). The graph shows the month-end closing numbers. Latest data point on August 31, 2021. Data sources: New York Stock Exchange (NYSE), Standard and Poor’s (S&P), National Association of Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE), and Reuters Chart: ConstructConnect .


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