Every day, Fisher Investments’ editorial staff scours the Internet for stories and opinion pieces to highlight on MarketMinder.com. And over the past several weeks, there has been a prevailing trend: Conjecture, rumors and worries about the eurozone debt crisis are dominating the “most read” lists on many news sites, while other, perhaps more relevant items are little noticed. As a pre-holiday treat, here are four stories you might have missed recently.
1. Japan’s economy is enjoying a post-earthquake rebound. Roughly six months after the Great Tohoku earthquake and tsunami, Japan’s GDP grew 6.3% year over year in Q3—the first positive read in a year. October’s economic data were also strong, as these snippets gathered by one of Fisher Investments’ Research Analysts show:
- Bank lending grew +0.1% y/y, the first positive read since late 2009
- Bankruptcies fell -14% y/y, reaching the lowest absolute level since 2005
- Machine tool orders accelerated to +25.9% y/y
- Money supply rose, important given Japan ’s recent struggles with deflation
2. Global trade is getting freer. As frequently written about on MarketMinder, free trade is a good thing for capital markets and the global economy. All parties involved in bilateral or regional free trade accords (FTA) tend to benefit from removing protectionist barriers—exports increase, and import flexibility gives consumers lower prices and more choices. Here are some recent developments:
- The US-South Korea FTA was ratified by both countries
- Japan and Mexico announced they plan to join the US , Australia , Malaysia , Peru and Vietnam in talks to join the Trans-Pacific Partnership. Current members are Chile, New Zealand, Brunei and Singapore.
- Russia appears set to gain approval to join the World Trade Organization
3. Corporate earnings are at all-time highs and still growing. In the US, corporate earnings grew 17.9% y/y in Q3.* Growth was broad-based, with all 10 sectors reporting higher profits and higher revenues—which tells us consumer demand is alive and well in the US. Read more of Fisher Investments’ earnings analysis here.
4. Chinese lending jumped to $586.8 billion yuan in October, ahead of forecasts. In recent months, loan growth was constrained, which is one of the reasons China’s economy slowed somewhat. Loan quotas are the government’s primary means of controlling economic growth, and it’s widely speculated the government has deliberately set tighter quotas this year, allowing growth to slow, to set the stage for re-acceleration in 2012. 2012 is an “election year” (actually, a pre-determined transition from President Hu Jintao to a new government), and Fisher Investments’ research shows China typically accelerates its economy in transition years to help ensure its citizens are content during the handover, mitigating the risk of unrest. Higher lending in October is further evidence suggesting this may indeed be happening this time.
Of course, one shouldn’t assume these stories, or any singular development, will be a cure-all for global equity markets. Volatility could very well continue, especially while investors remain cautious about the eurozone. However, despite today’s prevailing negative sentiment, positive fundamentals are at work too, and good news exists if you dig deep enough. This gap between reality and sentiment may prove an additional positive for stocks moving forward.
*S&P 500 earnings-per-share growth rate, with 491 of 500 companies reporting as of 11/25/2011. Source: Reuters.