"Kee" Points with Jim Kee, Ph.D.

Better news from China and Greece towards the end of last week led to a global market rebound that continues through today (Monday). In Europe, it looks like Greece will secure a conditional $95 billion over the next three years in exchange for concessions like pension reforms (higher retirement ages, etc.), privatization initiatives, public sector spending cuts, and tax changes like an increase in the value added tax, or VAT (widely considered by Greek citizens to be regressive). I don’t think anybody believes that Greece will actually deliver on all of these “conditions,” but it certainly avoids a Greek exit from the euro zone, and that is at least worth a relief rally for European investors. And China’s massive efforts to put a floor beneath its plunging—albeit heavily manipulated—stock market also seem to have had some positive effect, helped perhaps by a decent June Chinese export number. [JD1]The other positive last week was surely the relief that Wednesday’s New York Stock Exchange interruption (the market was suspended for 4 hours) was due to a software update rather than a cyber-attack.

 

For a little perspective on all of this, there are signs that the global economy is moderately expanding, with the growth rates of the developed economies increasing slightly, while the growth rates of the developing economies (led by China) slow. But the key to wisdom here, I think, is to recognize that the high 5%-plus global growth rates of the 2002-07 period were an anomaly. All of the world’s cylinders were hitting, which had really never happened before (quoting Noble Laureate Robert Mundell). So today’s moderate growth is more in keeping with the “normal” but still good pre-2000s period. I would not expect a repeat of the high post-2000s growth rates. As for stock exchange outages and glitches, I think these just go with the territory, as much as we prefer otherwise. It would be nice to have a world where technology and software are constantly improving and updating but with no glitches, outages, hacks, or cyber-attack attempts. But that’s a world that is pretty hard to imagine in practice, and I think overall we’re doing pretty well.

 

Finally, this week we are planning to release our quarterly STMM webcast, and I would certainly encourage you to view it! There will be brief commentary from Jeanie Wyatt, CFA ® (CEO and CIO), Leah Bennett, CFA®, CIC (co-CIO), Christian Ledoux, CFA® (Director of Research), Hutch Bryan, CFA® (Director of Fixed Income), and myself.