— aleatory

Why US GDP Isn’t Make Or Break

2nd Quarter US GDP is out today and the consensus expects growth to drop by one fifth of a percent to 2.5%. As GDP growth together with manageable inflation is how the US deals organically with taking on extra debt, it’s quite an important figure for the country.

But for Wall St the reality is the US economy is no longer the only one that matters to DJIA constituents. GM has sold more cars so far this year in China. Consumer stables giant Colgate dropped 7% after admitting a Venezuelan currency devaluation would cause it to miss 2nd Quarter earnings expectations. These are mainstreet USA companies playing in a post-US single superpower world.

The real impact of Globalisation has meant corporations are largely footloose and can react to a slowing economy simply by throwing capacity at a faster one. Scant conciliation for those tied into a downturn, but something to keep at the back of our minds as we watch the ticker go north while the numbers head south.

Incidentally I’ve just watched the futures tank on the GDP numbers. I think we’re in a largely technical market that could work to DJIA 10,250. But with macro worries from Europe dissipating and good news from emerging markets fuelling stocks with the necessary global exposure I would be surprised if we didn’t maintain an approach to the year’s high in the medium term.

That being said, 3rd quarter results may turn out to be the bomb much of the ‘smart money’ was premature in declaring the second quarter to be, so nimbleness is required.

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