Boom/Gloom Index slips as financial markets jump

Index Feb13.pngJanuary was, as usual, a good month for the optimists in the financial community. They filled the media with confident predictions of sustained and high levels of global economic growth. China will apparently soon be booming under its new leadership, the Abe government in Japan will quickly reverse 20 years of deflation, whilst the US recovery is set fair for the next few years.

The ‘surprise’ news that US GDP actually fell in Q4 slightly spoilt the story, as did China’s announcement that its 2012 GDP/capita of $5445 ranked it just 87th in the world. But as the IeC Boom/Gloom Index chart above shows, the bulls still managed to take the US S&P 500 Index to a new high, just under the 1500 level (red line).

The blog will look at the US GDP news in more detail on Monday. But as the chart shows, the Boom/Gloom Index (blue column) fell back into neutral territory during January, with a reading of 4.2. This is its lowest level since October, before the presidential election. For the moment, at least, it remains range-bound.

Neither of the Fed’s two recent stimulus programmes – Twist and QE3 – seem to be making much difference to it so far. This is quite unlike the strong momentum achieved after the 2009 G-20 stimulus programme and then QE2.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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