Follow U.S. Investment Immigration and U.S. Economy: Standard & Poor's, one of the world's three major rating agencies, held a meeting on the 16th to discuss the 2014 United States and global economic trends, as well as current market hot topics. Experts at the meeting believed that favorable factors for the U.S. and global economy will generally increase in 2014, and the growth rate will accelerate compared to 2013.
Paul Sheard, Chief Global Economist at S&P, stated at the meeting that global economic growth momentum weakened in 2013. Among them, the U.S. economy struggled to recover due to fiscal issues; the Eurozone remained mired in recession; and China's economic growth slowed down.
However, looking ahead to 2014, Sheard believes that global economic growth will accelerate slightly. In particular, U.S. economic growth momentum will strengthen, which is reflected not only in the improvement of economic fundamentals but, more importantly, in the reduction of the inhibitory effects of fiscal issues. The Eurozone economy will emerge from recession, the impact of fiscal austerity will ease, and the economic growth rate will approach 1%. China's economic growth is expected to be slightly lower than in 2013. Japan's economic growth momentum is expected to be maintained, but with the increase in the country's consumption tax rate, the effectiveness of "Abenomics" remains to be tested. Emerging economies will also perform well, led mainly by emerging markets in Asia.
Beth Ann Bovino, Chief U.S. Economist at S&P, also pointed out some optimistic factors facing the global economy: first, the Eurozone economy is emerging from recession; second, a hard landing for the Chinese economy is unlikely; third, the fiscal agreement recently reached by the two U.S. parties will avoid another federal government shutdown in the next two years. In addition, the U.S. economy is showing some encouraging signs, including: the private sector remains resilient, investment is increasing; the real estate market continues to recover; the manufacturing sector is also recovering, benefiting from the depreciation of the U.S. dollar and low energy prices; employment is increasing, and consumers are willing to spend.
Although the fiscal agreement recently reached by the two U.S. parties failed to resolve long-term issues, it temporarily removed the "Sword of Damocles" hanging over the market and was welcomed by investors.
Moritz Kraemer, Managing Director of S&P's Sovereign Ratings, said that the recent fiscal agreement reached by the two U.S. parties has reduced the risk of short-term fiscal issues, which is good news for the U.S. economy. Furthermore, the improvement in U.S. debt levels in recent years is also a positive signal.
However, Sheard also warned that the global economy still faces some risks next year: first, the reform of the European Union's banking union may lead to deleveraging of banks in the region or even trigger a credit crunch; second, U.S. fiscal issues remain a long-term risk; third, China's investment growth may fall too quickly; fourth, the spillover effects of the Federal Reserve's tapering of bond purchases may have a greater impact on emerging economies than on the United States itself.
Regarding whether the market will experience a correction after the strong rise of U.S. stocks this year, Sam Stovall, Chief Equity Strategist at S&P Capital IQ, reminded investors that U.S. stocks will be at the low point of the four-year stock market cycle in 2014. Especially in the second and third quarters of next year, which are traditionally sluggish seasons for the stock market, the U.S. Congress will face midterm elections, and the market faces some uncertainties, creating a demand for a correction in the stock market.
However, Stovall also stated that according to historical data, U.S. stocks generally have a good year after a strong rise. He expects that after recording a gain of more than 20% this year, U.S. stocks will continue to rise next year, with the S&P 500 index targeting 1895 points by the end of 2014.
"Of course, there are also 'headwinds' next year that could cause a technical correction in the stock market," Stovall said. These factors may include: listed company profits peaking, fiscal issues in Washington resurfacing, and the Federal Reserve's tapering of bond purchases exceeding market expectations. "Unexpected factors may also emerge next year, triggering a correction of more than 10% in the stock market."
Bovino stated that considering factors such as strong U.S. employment data, increased consumer willingness to spend, and the temporary resolution of U.S. fiscal issues, the Federal Reserve is likely to announce a reduction in bond purchases at the upcoming December monetary policy meeting.
If the Federal Reserve announces a reduction in bond purchases in December, Stovall expects that U.S. stocks may experience a correction of about 2% in the following two weeks, rather than a very drastic reaction, because investors are already prepared.
