Worries about Egypt reflect a worst-case scenario for the entire Middle East. While those worries are not unfounded, the odds of the unrest spreading to the oil-producing nations of the region are very low.
Egypt itself is no oil producer. But as the largest Arab nation with a peace treaty with Israel, it has the geostrategic presence that Tunisia lacked.
The Egyptian army, the 12th largest in the world, will be playing a central role in any future reconfiguration of the nation’s political system. And as the recipient of generous aid from the U.S., the army’s institutional interests lie in keeping peace with Israel and keeping the Suez Canal open for trade flows. Egypt has survived many pharaohs in its long history and will do just fine without the current one.
Egypt’s turmoil is no reason to overlook the arrival of self-sustaining growth momentum in the U.S. economy. Friday’s GDP report showed that for the first time in this recovery, economic growth came through as a result of household spending and corporate investments, with hardly any contribution from government spending.
The only missing piece at this stage is the arrival of a full-fledged labor market turnaround. It will no doubt take a while for the unemployment rate to come down from its current sky-high level. But the start of positive job creation will be a positive move in that direction. It is in this context that we will be looking at the nonfarm payroll report for January coming out this Friday.
Corporate profitability has stood out throughout this recovery and the current ongoing earnings season is in-line with that trend.
Earnings reports this morning are impressive. Exxon beat expectations, with eye-popping results. Illinois Tool Works came ahead on both EPS as well revenue fronts. Gannett Company, the publisher of USA Today, beat earnings and revenue expectations. On the economic front, we had December consumer spending come ahead of expectations, while income growth came in-line.
Sheraz Mian
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