While the rest of the world is struggling economically, the U.S seems to be a class apart. The world’s largest economy continues to show positive signs of full recovery with jobs growth and the unemployment rate showing significant improvement one month to the other.
Some analysts are yet to be convinced by the U.S economic growth, which has been rising significantly one quarter to the other since last year. They are of the opinion that the current growth is not well mirrored in the real lives of people.
A good example is the fact that the average wage per hour missed estimates in the most recent nonfarm payrolls numbers.
What Does Strong U.S Economic Growth Mean for Investors?
Generally, impressive economic data shows that the U.S economy is on the right track to recovery and with the highly anticipated uptick in interest rates on the horizon, this means that better days are still ahead from an investment perspective.
This is because high interest rates will boost the overall U.S financial markets by promising higher returns to investors. This includes the bond market, as well as the equities market.
On the other hand, high interest rates are also likely to boost the strength of the USD, which, based on recent average exchange rates against major currencies as sampled from various exchanges, may have already factored in most of the anticipated uptick in interest rates.
The USD/CAD is currently exchanging at 1.2686 against the CAD, and USD/AUD at 1.3113 against the AUD. On the other hand, GBP/USD is going for 1.5056 while EUR/USD is exchanging at 1.0681. These are multi-year highs for the USD against other major currencies and it seems set to continue, especially given the promise of the U.S economic growth against a struggling global growth.
Therefore, this also means that investors would be comfortable owning the USD, but no so comfortable when being paid in other forms of currencies.
This further justifies why now could be a good time to invest in the U.S, and given the nature of the equities markets, it appears as though many convinced that the U.S is a good investment opportunity at the moment.
On the flip side though, investing in struggling economies instead of the U.S could also carry enormous benefits, because ideally, you will be investing at very low costs, for potential high gains. However, the risk associated with such investments would be greater than that incurred when investing in the U.S.
Conclusion
The bottom line is that despite the fact that the U.S economy is growing at promising rates, and the U.S is strengthening, the US nation is not immune to global macro-economic forces and could as well follow the struggles depicted by the rest of the world, if the global economic slowdown continues for an extended period.
Therefore, while putting money in U.S investments seems to be the safest option at the moment, there is no guarantee that this will be the case a year or two from now.
