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Where’s the Growth Story

June 4, 2012 – 5:03 pm

Though the news media seems to be focused on Spain and Greece it might be more instructive to concentrate on China and India. Last week both countries reported numbers suggesting a further slowdown in their respective growth story and that is a concern for far more areas of the world economy than just Europe.

Both countries are still growing at lofty levels of 6 to 8% when the U.S. is struggling to grow 2% but when compared to the ten year average of 10% for China and the high single digit percentage for India you can understand the concern not only inside those countries but for the rest of the world.

It is not that their growth has slowed. It is the fear that it might slow further. Most agree a hard landing for both economies is off the table but no one seems to agree as to the scale of a stimulus China or India may use to reignite their economies. In some ways they welcome the weaker property and commodity prices. In fact they were pushing for that weakness just a short while ago to beat back some disturbing inflation. India in particular is still fighting inflation.

Any stimulus for either country will likely be targeted and limited but the operative word here is stimulus. There will be something just as there will be efforts from Europe to do something. That alone would likely produce at least a short term market rally from a very oversold situation for stocks. But will it be enough to reignite the growth story?

Good Trading
Steve Peasley

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