Daily Brief: Chinese Growth Looks Positive, And The US Should Be Feeling Nervous About It

Daily Brief: Chinese Growth Looks Positive, And The US Should Be Feeling Nervous About It

about 3 years ago3 mins

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Here are some surprise results investors can really get on board with: China revealed on Monday it grew by a better-than-expected 6.5% last quarter.

What does this mean?

China’s is the only major economy that didn’t shrink last year. In fact, it’s now officially growing faster than it was before coronavirus struck – a boom that’s been fueled by pandemic-driven global demand for both its medical supplies and its work-from-home tech. And it’s likely to keep outdoing its competition for a while, with economists expecting its economy to expand at its fastest pace in a decade this year. The country’s still grappling with the fallout of the pandemic just like the rest of us, mind you, so there’s plenty of risk to its growth outlook yet...

China’s quarterly economic performance

Why should I care?

The bigger picture: Mo’ money, no problems.

Economists reckon China’s rapid recovery will see the country overtake the US as the world's biggest economy in 2028 – five years sooner than they’d previously estimated. That rapid growth should also transform it into a high-income country by 2023, and make this fast-growing consumer market – which already accounts for a quarter of the world’s middle-class population – even more appealing a prospect for investors to buy into.

US and Chinese economies 2010-2035

For you personally: Equal opportunities.

Chinese shares are doing well too, with the country’s stock market just hitting its highest level in 13 years. But stocks aren’t the only Chinese asset you might want to add to your portfolio this year. See, one of the world’s biggest index providers is set to confirm in March if it’ll add Chinese bonds to one of its major bond indexes – one of the most widely used benchmarks for global government bonds and, in turn, one tracked by passive funds the world over. And if the provider gives the thumbs up, demand for Chinese bonds could jump by as much as $140 billion.

Keep reading for our next story...

Goldman Sachs Upped Its Forecast For US Economic Growth

US image

Looks like America might be stronger than Goldman Sachs first thought: the investment bank upped its forecast for the country’s economic growth over the weekend.

What does this mean?

Goldman’s now forecasting 6.6% growth in 2021 – up from the 5.9% it was predicting in early January, just before Democrats won control of the Senate. And there’s one big reason for the bank’s swift change of heart: the US president-elect’s ambitious economic plan – to spend $1.9 trillion supporting individuals, companies, and infrastructure – is now much more likely to get the go-ahead. And sure, Goldman suspects the proposal will be tweaked along the way, but it still reckons the mooted $1.1 trillion spending on education, public health, and unemployment insurance is a sure thing – and sure to boost economic growth too.

Goldman Sachs 2021 GDP growth forecast

Why should I care?

For markets: Wait for it…

Better economic prospects for the country should have knock-on benefits for its companies: Goldman’s expecting a big uptick in consumers’ disposable income, which should boost the amount they spend on goods and services. The bank also thinks the US Federal Reserve (the Fed) will hold off on hiking interest rates until the second half of 2024, which will make it cheaper for companies to borrow business-boosting cash. But if you’re thinking of buying up stocks while the going’s good, you might want to hold fire: the US stock market recently hit fresh highs, and Goldman – despite feeling good about stocks in the long term – reckons it’s about to dip.

S&P 500
Source: Google Finance

For you personally: Compare and contrast.

Remember to take economic forecasts with a pinch of salt: Goldman’s 6.6% estimate for US growth this year is both the second-highest in an 84-strong survey and well ahead of the 4.1% median. So it’s always worth contrasting more optimistic views with more cautious ones, and weighing up all the opinions on offer to work out which ones you agree with.

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