This micro view is influenced by accelerating earnings, stepped-up confidence, prospects for spillover into spending and investment, all coming together after a long holding period.
China’s reluctant consumers also are coming alive. Just ask Alibaba. Chinese millennials, after allowing their initial decade of stepped-up income to swell savings rates to unheard of levels, now are spending down this enormous pool of funds. Stocks are comforted that central banks are signaling the gradual removal of fragility-based monetary policy, which they see as validating their confidence in the outlook and fortifying future safety nets.
Since the last two recessions were caused by bubbles that burst – first in the stock market in 2000-2003 and then in the housing market in 2007-2008 – early central bank tightening should extend the cycle, say the optimists, and thus is a positive.
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