Despite the optimism that is being touted around U.S. markets that things are back to relative normality, this is still not the case. There is still something of a lingering hangover from the catastrophic turmoil in global markets over the last few months
Markets Still Depressed
The S&P 500 for example is still far below its high for this year of 2,130 which was set in May before the troubles in China spread across the world like a particularly nasty cold. While the U.S economy is supposed to be on track for a period strong continuous growth, the economic data is not entirely supporting this optimism, with economic figures constantly coming in lower than expected. This is the key reason why the Fed has not yet decided the time is right to raise interest rates. If the economy was as strong as politicians claim, rates would have gone up in August despite the global gloom.
It is not only China that is causing global issues, as the EU is having similar problems and even with some fiscal easing, borrowing is still stagnant as businesses are wary of increasing their debt. Japan has also revised its economic forecasts downward and commodity driven economies such as Australia, Canada and Brazil are staring into an economic abyss if prices do not recover by sometime next year.
Flying into a Headwind
While many investors remain bullish over U.S. stocks, with the increased globalization of the majority of U.S. companies, they cannot just simply rely on a growing domestic economy to power their earnings and the global economic slowdown is effectively dragging them down as well. Revenue from corporations with significant overseas operations declined significantly in Q3 and even more so year on year. In fact one of the only markets that is performing consistently well this year is U.S. Treasuries, at least until the Fed finally decides the time is right to raise rates.