Market Update: Thursday, March 29, 2018


Daily Insights

  • Global synchronized economic expansion continuing. The global economic expansion remains very broad. Only one country’s Purchasing Managers’ Index is below 50 (Malaysia) across medium-to-large economies, and the global aggregate level is in the mid-50s and accelerating (a level above 50 indicates expansion). These levels are indicative of both further economic growth and a strong global earnings environment. We believe trade tensions or related market volatility are unlikely to derail the ongoing global expansion and expect the broad picture of coordinated global growth to be supportive of equity gains in U.S. and emerging markets (EM) in 2018.

  • Economic growth differential between EM and DM is positive for EM. In recent decades, when the economic growth differential in EM relative to developed markets (DM) is positive and increasing, EM equities have tended to outperform the U.S. and DM equity benchmarks. That gap, based on gross domestic product, was nicely positive in 2017 (2.5%), and is expected to increase in 2018 and 2019, based on Bloomberg consensus and IMF forecasts.

  • Fed’s preferred inflation gauge meets expectations. The 1.6% year-over-year increase in the core personal consumption expenditure price index, which removes the volatile food and energy components, was in line with consensus expectations. While inflation remains stubbornly below the Federal Reserve’s (Fed) 2% target, more recent data suggest progress is being made to boost prices. We’ll highlight these factors, and discuss potential implications for the path of rate hikes in 2018, later today on the LPL Research blog.


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