The S&P 500 is 8 points shy of its all-time high despite the weak economic numbers from NAHB and Empire State. The weather has been the hall pass for all the terrible economic numbers so far and last night was no different.
Homebuyers were put off by the severe winter that has gripped the US. It is clear the power of Yellen’s testimony has resonated and the ripple effect is the renewed confidence in the world’s largest economy.
After the Nikkei boosted a record 57% return last year and had investors drooling, this year it has been struggling to keep the beloved status of the investment community, with a return of -8% year-to-date. Yesterday’s BoJ announcement of boosting lending program put a brake on the slide and Japanese stocks are staging a comeback. The true test of whether the BoJ has managed to reverse the downward momentum which has plagued the Japanese stock market is how the markets will react for the rest of the week.
At a time when the Fed is exiting its accommodative policy, where it has driven the S&P 500 up by over 170% since the start of its program in 2009, BoJ is adding stimulus. The soft GDP numbers, where growth in the Q4 of 2013 was only half of the forecast, heightens the concerns on Japan’s economy. The highly contended implementation of the April sales tax continues to loom over a possible slowdown. The issues facing Japan is similar to the US; where investors would like to see improvements in household wealth, wages, and investments.
While the US is in a different stage of recovery, the record low labour participation rate is a concern, and until solutions are created to address this, lower productivity could underpin the economy.