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An article in
Canada's Financial Post,
"View of U.S. Markets As Isolated From the World ‘Dangerous
and Misguided,’" serves as a
good primer on Wall Street's cognitively disconnected math:
Combine deteriorating
conditions overseas --
The chief
market strategist at U.S. Trust Bank of America Private Wealth Management
warned against concluding that the relative outperformance of U.S. stocks
last year and recent string of strong U.S. economic data mean the
country’s equity markets are “decoupling” from the rest of
the world.
The U.S. economy may be in decent shape — with strong manufacturing and
record exports of more than US$2-trillion in 2011 — but the country is
not isolated from what happens in Europe or the rest of the world, Mr.
Quinlan said in a note to clients Friday.
“In our
view, the ‘decoupling’ chatter is dangerous and misguided, since
there are plenty of problems and challenges brewing overseas that will be
directly or indirectly channeled back into U.S. financial markets,” he
said. --
with
direct threats to bottom-line profitability --
With half of
U.S. foreign affiliate sales coming from Europe, Mr. Quinlan said the ongoing
crisis in the region remains a “potential source of earnings
disappointment for a number of U.S. firms.” --
heightened geopolitical
risks --
Tensions
between the United States and Iran and continuing social instability in the
Middle East are also a concern, he said.
“We think
of it as an ‘arc of instability,’ or a geographic cauldron that
could unexpectedly and swiftly rattle the global oil markets and undermine
global economic growth.” --
and major
global structural imbalances --
Finally, growth
in emerging market nations may be a bright spot, but the focus on exports in
those countries is “depriving the world economy of badly needed global
demand,” he said. --
and
what do you get?
Ultimately, Mr.
Quinlan said, the economic trends look positive for the United States and the
country’s stocks are likely to outperform again this year (he estimates
the S&P 500 will end the year in the 1,300 to 1,350 range, up from its
current 1,290).
Huh?
Michael J. Panzner
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