Stocks at record highs, even though economies decline

Wall Street ended the past business week on record highs

Yet, the reason is not prosperous American economy. The same can be applied on other important global economic centers.

American economy keeps growing, yet the dynamics significantly declined in comparison to the beginning of this year. Other signals of slowdown come from manufacturing industry and retail. The producers lowered their production the most in October due to expectations of low foreign demand. The October reduction was strongest in last 17 months.

The latest data from Germany confirm that the biggest European economy is stuck in a place in third quarter of the year, even though its GDP increased in tenths of percent. The UK similarly avoided recession when it grew in 3 tenths of percent in the same time.

Why do shares lead to new highs? One explanation could be the moderate policy of Fed, American Central Bank which recently reduced its interest rates. The European Central Bank decided to walk the same path. A second factor can be the lasting optimism around European Central Bank. Even though Donald Trump stated he promised no tax reduction, the markets still hope the trade barriers will be removed. That should in the end help the real economy, too.

 

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