Bouchey Financial Group 4th Quarter Market & Economic Review

Market Overview

The saying has always been “when the U.S. sneezes, the rest of the world catches a cold.” Watching the performance of the stock market this past quarter one may wonder if this adage needs to be adjusted to “when the U.S. or China sneezes, the rest of the world catches a cold”. The concerns about slowing growth in China and other emerging markets have been the root cause of the market volatility. The reality is that our exports to China make up less than 1% of U.S. GDP and what happens in China has very limited impact on the U.S. economy. As Exhibit 1 below shows, China’s economy is well into a contraction period or at the very least a period of low growth while the economies in the U.S., Germany and Japan are still in the mid-stages of the business cycle. The mid-stage of a business cycle is usually characterized by positive GDP growth, modest increases in the stock market and rising interest rates as inflations begin to increase.

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