India. The second wave of Covid hit India hard this spring. Yet the Indian economy rebounded at a record rate in the Second Quarter. The +20.1% year-on-year growth is being attributed to looser pandemic curbs and more activity (all of this is in comparison to the same April-June quarter in 2020, which posted a -24% year over year growth rate.) The economic reemergence has been obvious looking at the Indian market; it’s up 20.5% year-to date through August 31.
Experts are optimistic that India will continue to post strong economic growth.
Europe The EURO STOXX 50 index is +18.1% year-to-date through August 31. The index has posted several straight months of gains on the back of strong earnings and a relatively high vaccination rate. Europe is “still riding the Powell wave” as one analyst put it.
It was a big month for the Shanghai Composite last month (4.3%), but the index is only up 2% YTD. Long term, China’s fundamental growth story remains intact. One reason is that the country continues to industrialize. China will likely be the future manufacturing giant for automobiles and electronics as the cycle continues to move away from the US, Japan, and Korea.
Even with world market coming off great years, we believe the markets have room to move higher.
There are several reasons:
Corporate profits are always the key, and they continue to be very strong.
Fed support is still in place.
There is potential for fiscal stimulus coming out of Washington, DC.
Vaccination rates are climbing.
The big “de-railer” for the markets would be higher interest rates, and that threat remains “down the road.” .