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How Will the Global Markets Affect the U.S.?

How Will the Global Markets Affect the U.S.?
November 16
15:45 2015

Many Americans worry that the faltering global markets will eventually lead to the demise of the U.S. market as well. However, much of the global capital will continue to flow into the U.S. markets because of the shaky situations elsewhere around the world.

So why will the U.S. continue to thrive? Consumer spending is on the rise, mainly thanks to the graying Baby Boomer generation, which helped raise health care and insurance spending at double the pace of other businesses in the third quarter. Because our economy heavily relies on domestic spending as opposed to exports, higher consumer spending combined with lower unemployment rates gives the U.S. market stability.

The U.S. bond market will continue to take in capital from around the world because of the lack of returns available in other markets. Bond yields, although low, continue to have higher returns than Canada, Germany, the UK, France, Italy and Spain, to name a few. The same goes for the U.S. stock market, which has not yet reached the post-recession peak seen in 2009-2011, but has performed quite well compared to markets abroad.

There will always be some Americans who focus on the negatives and continue to predict the downfall of the American markets, like those who believe the lack of wage growth and stagnant corporate earnings spell doom. In reality, wage growth is increasing, although at a slow rate, the percentages match up almost directly with growth rates seen throughout the last half-century. Energy stocks did impact corporate earnings and lead to an overall decline in earnings per share, however, without these stocks factored in, U.S. earnings actually saw an increase. Plus, lower costs associated with energy could lead to long-term market growth because of lower production and distribution costs.

The uneasiness in the China market has carried over to U.S. investors who worry that this means a market crash is near. Most economists expect China to create many business opportunities for international US companies in the near future, which will further stabilize the U.S. market.

U.S. investors should continue to focus on the long-term and put their fears about the collapse of the global market behind them. A diversified portfolio of U.S. stocks is a safe choice for any investor focusing on growing their 401(k)s.

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Mina Sinai

Mina Sinai

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