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Following last week's upheaval over Turkey's currency nosedive, this week proved remarkably calm in markets. There was a broad recovery and the US' S&P 500 stock market index even hit an all-time high on Friday, which supposedly also now constitutes the longest bull market period. This had financial commentators around the world excited and musing about the probabilities that this long period would have to come to an end very soon – simply because of historical precedence.
Which region has surprised economists recently? Regular readers will know we look at Citi's "surprise" indices for regional economy data, which measure how various aspects of the economy have lived up to economists' expectations.* The chart below shows those indices over the past three months for the major regions we watch.
This week has seen the S&P 500 hit an all-time high as well much of the media hailing it as the longest lasting bull market recorded for the US market. Even though we see the latter record as debateable (because there is a lack of agreement about what constitutes a bear market, which is clearly required to define the starting points of previous bull markets), it is nevertheless worth having a closer look at the drivers behind, and potential catalysts for, change of the current one.
China's slowing economic expansion has been one of this year's main stories. Along with the strength of the US dollar and the Federal Reserve's tightening regime, Chinese demand weakness is a key reason for the wider struggles in emerging markets (EMs). Just as the credit-intensive stimulus of 2015/16 propelled Chinese growth and generated much needed demand in EMs, the tightening of financial conditions we're seeing from the government now is constraining the economy.