Global stocks: buy now, cry later?

Stock markets across the West exuded confidence last week. On Thursday, the S&P 500 climbed to a fresh four-month high, the Dow Jones Industrial Average sat pretty above the psychological benchmark of 13,000 and stock markets across the Euro zone were testing 12-month highs. Analysts across the spectrum of bourses and across both sides of the Atlantic attributed the bullish sentiment to improved expectations of the economic prospects of the biggest economy of the world; the United States of America. A recap of the factors contributing positively to stock prices features improved retail sales data from the US, coupled with Germanys nod in favour of the European Central Banks plan to buy sovereign bonds of EU member states. US retail sales jumped to a five-month high in July, posting the first advance since February. However, some economic observers are terming these gains as fleeting, attributing the increased retail sales to ack to school shopping and bargain hunting in place of routine purchases. Retail tallies are only likely to remain upbeat, if the pace of new jobs also picks up in coming weeks. More importantly, although the markets have enjoyed a spurt of-late, albeit with significantly low volumes; some of the most prominent American economists, including advisers to US Congress, are not buying. "Despite some positive signals from the US economy lately, a scheduled increase in taxes next year may pose an immediate risk of slowing growth" contended the CS Monitor on August 17. It voiced concerns that US legislators on both sides of the fence remain "miles apart", just months before Bush-era tax cuts and similar breaks awarded by the Obama administration expire, slamming US businesses with additional taxes amounting over 600 billion dollars. The nightmare haunting US economic experts is that even if Democrats and Republicans are able to set down the war drums of the Presidential elections long enough to build consensus for the resolution of the fiscal cliff, the lag between now and then may further erode business confidence. Analysts believe that uncertainty on the fiscal front is forcing US businesses to hold back on plans for expansion and fresh hiring. In fact Chinese stocks may be presenting a more realistic outlook for the advanced economies of the world. While share prices in the Orient have moved both ways in recent sessions, futures contracts have mostly taken a beating, particularly for export-oriented manufacturing firms. In a nutshell, Chinese firms are holding off on counting their chickens until the egg of economic uncertainty in the US and EU hatches.