World Economies Have Been Growing in Sync – What Does It Mean?

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Published by Taylor Financial Group

There have only been three occurrences of synchronized growth among the World’s largest economies since the 1980s.  The second of which was in the mid-2000s, and the third is happening as we speak!  The United States, China, Germany, Japan, France, the United Kingdom, and India (considered the World’s seven major economies) each grew more than 1.5% in 2017, according to estimates from the International Monetary Fund.  Last year’s world-wide economic growth is the first time since the 2008 financial crisis that we’ve seen such global progress.  This synchronized economic development was first noticed in 2017, when the Organization for Economic Cooperation and Development found that all 45 major economies were growing at the same time.  So, what does this mean?

Continued Synchronized Economic Growth for 2018

Recent data from JPMorgan Chase indicates that industrial production levels are the most robust they’ve been since 2011, “powered by impressive gains in global retail sales and capital expenditures,” according to David Hensley, Director of Global Economic Coordination at JPMorgan.  At least partially as a result of this growth, the markets have been soaring over a one-year period, for the most part.  This united global strength can partially be contributed to its ability to “self-reinforce.” For example, as pointed out by Jay Bryson, Global Economist for Wells Fargo Securities, we can see how growth in the US contributes to growth in European exports and the European economy, which then comes back to the US in the form of higher demand for our own exports.  The same types of cycles occur globally from economy to economy.  And with exports increasing the way they have been, this type of expansion can continue for a long while.  In fact, the International Monetary Fund recently estimated that 85% of the world’s nations increased exporting in 2017.  That’s huge and a good indicator of how things may continue for 2018.

How Long Will It Last?

History shows that these periods of global growth tend to last about three to five years, give or take.  When it happened in the 1980s, it lasted for about five years.  Then, again, in the 2000s, it lasted for approximately three years.  Since we only just started seeing this synchronization in 2017, economists are predicting we may continue to see this economic expansion across the globe for another few years.  This prediction is, of course, notwithstanding the possibility of geopolitical issues, like wars and policy changes, as well as other potential economic challenges.  But economists remain optimistic for continued world-wide economic progress, for now.

Overall, economies near and far have been good to us and the markets have been performing well.  That’s not to say that we won’t continue to experience some bumps in the road, as we’ve mentioned before.  But let’s enjoy this almost unprecedented global harmony while we can.

If you have questions about your investments or your financial plan, give us a call today.  We are ready to help you build a better future.

 

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