World Economic Tug of War
While it may be a bit presumptuous to say that the US economy is still the “epicenter” of the world economy, given that some of the developing countries, especially China continue to grow, albeit slowing, more than the US, the US is still the #1 powerhouse and force in the world economy. Therefore, it is still valid to consider this “epicenter” and it’s current health. However, as world economies become increasingly interdependent, we must more than ever consider the complex interactions between world economies in order to more completely understand the big picture.
The checks and balances, both within the US economy and between the US and other economies, remains quite interesting. The US economy has been expanding for over 5 years, which has caused the US dollar to appreciate significantly vs. other currencies during this time. Naturally, when this happens for a long enough period of time, US-made goods become more expensive for foreign buyers, which ultimately puts a cap on US growth, allowing other economies to grow in relative terms.
While the time has not yet come for another US recession, especially considering that gas prices at the pump may remain low for an extended period of time as some predict, the relative health of the US economy should remain intact at least for the next few months. Consider that lower gas prices during the 4th quarter of 2014 alone translated into a whooping $130 BILLION in savings for consumers, much of which will drive consumption growth for goods other than gas. Add this reality to the fact that non-US consumers will continue to invest in the US, it will only further prop the US economy and stock market, if only because the US remains the best, brightest, and safest market for investors.