Finance

The economies of the United States, China and Europe are drifting apart, and global “decoupling” is changing markets.


Bank of America says the global economy is decoupling.Kate Gillen/Getty Images

  • Bank of America says the world’s largest economy is experiencing “decoupling.”

  • The United States has shown surprising resilience, Europe’s growth has been weak, and China has faltered.

  • Global stock markets reflect changing trade and supply chain trends.

largest player Global economy On different trajectories, markets around the world are reflecting the changing landscape.

Bank of America believes that the U.S. economy continues to demonstrate extraordinary resilience, while European economic growth has faltered. China faces the most challenging prospects among real estate woes, deflationand demographic headwinds.

“There are signs of decoupling in global growth, trade and equities,” Bank of America strategists wrote in a Friday note.

Especially in the United States, GDP growth has been strong in recent quarters, inflation has cooled steadily, economic data is optimistic, and the economic outlook is optimistic. Stock market rebounds That won’t give up.

The Bank of America regards a soft landing and loose monetary policy starting in June as the basic expectation of the United States. Many on Wall Street share a similar view, and investors have traded on that optimism, with the S&P 500 notching a string of recent records. weeks.

Stronger-than-expected growth and strong labor market data point to continued growth in 2023 Positive momentum in the new yearAccording to Bank of America.

The company noted that tighter financial conditions have put the U.S. commercial real estate industry under greater pressure, as reflected in Greater pain in office marketTreasury Secretary Janet Yellen expressed her concerns about commercial real estate but remained confident it would not turn into a systemic risk for the banking industry.

There is still some uncertainty about what steps the Fed will take next to address the “last mile” of inflation, but this will not greatly affect the positioning of the United States relative to other economic powers.

At this point, the outlook for the eurozone looks bleak.

“[G]Growth in the euro zone has been very weak, including weaker-than-expected data from Germany,” the strategists said. “Nonetheless, our base case remains for the ECB to start cutting interest rates in June.”

Bank of America expects euro zone growth rates of 0.4% and 1.1% in 2024 and 2025 respectively. But growth in Germany, the euro zone’s largest economy, will weaken to -0.4%, while Spain will show its strength, growing by 1.3%. Assuming no additional growth shocks, convergence will eventually occur.

The strategists insist: “From a market perspective, weakness in Germany is easier to digest than weakness in peripheral countries. Germany’s domestic demand remains the main driver of exports from other euro area countries, but given European integration, German exports The same is true for itself.” Internal production chains in the euro area. “

China faces unique headwinds, including unfavorable demographics, bleak consumer confidence and foreign investor outflow.

Bank of America's outlook for the global economyBank of America's outlook for the global economy

Growth forecasts for the United States, Eurozone and China.Bank of America Global Research

These contrasting economic performances are already reflected in the stock market, with China lagging behind the world and struggling to get out of trouble. ‘Super Bearish’ Narrative.

Bank of America strategists said, “The S&P sign.”

Chinese stocks have moved in the opposite direction to U.S. and European stocks.Chinese stocks have moved in the opposite direction to U.S. and European stocks.

Chinese stocks have moved in the opposite direction to U.S. and European stocks.Bank of America Global Research

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