Is this a gift from Santa? December 26 is the first trading day of the US stock market after Christmas. All three major stock indexes have reached a new high. Among them, the Nasdaq index, which is dominated by technology stocks, broke through 9,000 points for the first time. On the morning of the 27th, the US stock market continued to rise after the opening. Technology companies such as Amazon have strong stock prices, unemployed people have fallen, consumer spending has risen … This round of growth is inseparable from better-than-expected economic data and corporate profitability. The optimism of the prospects of the US economic and trade negotiations. The Ministry of Commerce of the People’s Republic of China said on the 26th that it is in close communication with the United States on the follow-up work such as the signing of economic and trade agreements, and Wall Street subsequently responded positively to this statement. The Sino-U.S. Economic and trade friction is a high-profile event in 2019. In the eyes of the world, the two countries are heading for the new year with an economic and trade agreement that is expected to be signed soon. And whether it can maintain a relatively stable relationship with China is about whether the US economy is facing a risk of recession. After all, in most economists’ predictions, Washington ’s GDP growth rate will decline next year, which means that its economy will be more fragile than this year, and it will be more vulnerable to external shocks.
China-U.S. Economic and trade relations eased and boosted stock market
As of the close of the 26th, the US Dow Jones Industrial Average rose 0.37% to 28621.39 points, the S & P 500 rose 0.51% to 3329.91 points, and the Nasdaq rose 0.78%. According to Agence France-Presse, in the Asian stock market on the 27th, the Hong Kong Hang Seng Index rose 1.3%, the Shanghai Stock Exchange Index fell less than 0.1%, and the Nikkei fell 0.4%. In Europe, both London and Paris stocks rose 0.4%.
According to the British “Financial Times” reported on the 27th, Nasdaq achieved 11 consecutive days of rise on the 26th, thanks to the e-commerce giant Amazon stock price rose 4.5% to help. Earlier, the company stated that the holiday season had great sales results. Other technology stocks also performed strongly, with Apple, Facebook and Alphabet stocks all rising more than 1.3%.
“Trump stock market has risen far more than the US President.” Trump said on Twitter on the 27th. According to the US CNBC website, the S & P 500 Index has gained 29.2% this year, which can be described as a “significant year.” However, compared with other stock market conditions in the third year of the presidency, Trump is not the best, and the stock market growth rate is lower than that of Obama in 2013.
The British Reuters said that the Federal Reserve’s interest rate cuts, better-than-expected economic data and corporate profitability helped boost the stock market. Data from the U.S. Department of Labor on the 26th showed that in the week ending December 21, the number of Americans claiming unemployment benefits fell by 13,000. In addition, a Mastercard report shows that from November 1 to December 24, US retail sales rose 3.4% year-on-year.
The main reasons for this round of stock market rally also include the market’s optimism about the prospects of China-US economic and trade negotiations, which also boosted international oil prices on the 26th. “The biggest Christmas gift.” Germany’s “Economic Weekly” said on the 27th that Wall Street continued to send positive signals about economic and trade negotiations. For a long time, the US stock market has been affecting the world. Now, one country can influence Wall Street, China, the world’s second largest economy.
In addition to economic indicators and economic and trade negotiations, “cyclicality” may also be one of the factors contributing to the higher US stock market. Ye Wenbin, vice president of the US PNC Financial Services Group, said to VOA that on the trading day between Christmas and New Year’s Day, it is often seen that the US stock market is performing well. This is the so-called “Santa Clause rally.”
However, the CNBC website said on the 26th that the latest data show that new orders for US core capital goods have barely increased in November, and shipments have fallen, which means that business investment may be a factor dragging down the US economy in the fourth quarter.
U.S. economy still at risk of recession next year
“Can the US economy avoid the recession in 2020?” According to the 26th issue of the Detroit Free Press, the answer is yes. The longest-term economic expansion in the history of the United States, which began in June 2009, still looks promising.
The CNBC website lists reasons why the US economic expansion has lasted so long. It is reported that the United States is coming out of the trough that fell into the end of the last decade. The recovery of employment growth is slower than in previous periods of economic prosperity, partly because unemployment was too high during the financial crisis. As some economists have said, the deeper the hole, the longer it takes to climb out. Wilcox, a former director of the Federal Reserve ’s research and statistics department, said stimulus measures taken by policy makers during the financial crisis are important factors now driving economic recovery, such as quantitative easing.
The Financial Times reported on the 27th that China is expected to introduce some economic stimulus measures next year to support other emerging markets around the world, which is also good news for the United States.
“Even if people generally think the outlook is optimistic, this kind of ode is not a stubborn stance.” The Detroit Free Press said that as long as there is “major friction” with China, or experiencing a hike in interest rates caused by debt-laden companies, It could lead to a recession in the US economy.
Economists at the University of Michigan recently said that as the effects of stimulus measures such as corporate tax cuts, investment incentives and huge federal spending diminish, the economic growth of the United States will slow down next year. United States Bank’s chief economist Dye predicts that next year’s US GDP will grow by 1.9%, which is lower than the expected figure of 2.3% this year. Slower growth means that the economy will be more fragile and more susceptible to any disturbance or external shocks. “The US policy dividend has reached the top, and it is difficult to come up with a strong promotion policy.” German news and television analysis on the 27th said that some economic indicators have shown a downward trend, such as the consumer confidence index. As of November, the U.S. PMI was below the 50 line for the fourth consecutive month.
CNN on the 26th published an article by Mark Zandi, chief economist of Moody’s Analytics, saying that in the early part of the next decade, the recession will still be a serious threat to the United States. Slow economic growth means that it is difficult to create the jobs needed to support low unemployment, and rising unemployment may lead to a vicious cycle of recession. At the same time, the United States is facing the challenge of a huge budget deficit and an increasing debt burden. The Kipling Financial Magazine says that if the U.S. unemployment rate exceeds 4% (currently 3.5%), a recession is likely to occur. Today, it seems that US companies are continuing to do everything possible to find various excuses to reduce investment. The Detroit Free Press said that various political dramas are also factors of uncertainty in the development of the US economy, such as impeachment. Consumer and business confidence may decline as more negative campaigns run through 2020.
Do people still worry about the trade war in 2020?
Should people still worry about the trade war? The US Fox News Network quoted Bank of America economist Michel Meyer as saying on the 26th that the first-phase economic and trade agreement reached between China and the United States is expected to continue the “ceasefire” until the end of the US presidential election in November next year. Moody’s economist Zandi believes that the “trade truce” reduces the possibility of a 2020 recession in the United States, “but given that the matter has not settled and that there may be another rumbling after Trump’s re-election, the company remains cautious”.
Russia’s “Businessman” said on the 27th that the Sino-US trade war is one of the biggest events in the world economy in 2019. A series of negotiations and trade initiatives between the two countries have affected each other’s economic development plans, and the two sides have committed to bringing investment back home in their own ways. At present, China is expanding its domestic market to promote economic development. EU countries remain optimistic about China’s economic development prospects.
Foreign media have expressed doubts as to whether the objectives of the first phase of the economic and trade agreement can be completed and whether China and the United States can make progress in the subsequent negotiations in the “deepwater area”. According to Singapore’s Lianhe Zaobao, the deep background of the Sino-US trade war is the “rigid contradiction” of ideology, economic structure and values, and it is difficult to achieve a “win-win”. Hong Kong’s “South China Morning Post” said on the 27th that a United States “decoupled from the world” and an increasingly powerful China are heading towards the end of 2019. This year marks the 40th anniversary of the establishment of diplomatic relations between China and the United States, but the two countries continue to fall into economic and geopolitical struggles. To end the trade war and resolve fundamental differences, this staged economic and trade agreement is not enough. However, Zhu Zhiqun, a professor of international relations at Bucknell University, believes that China and the United States have successfully avoided the worst. The new normal of relations between the two countries is more competitive and conflicting, but neither side has given up on cooperation, a more desirable form of interaction.