Global Growth Slowdown Is Threat To Markets

With positive comments from Microsoft and Countrywide today, it's time to step back and take a slightly broader view of the markets:

--The S&P is up 7% this year (and 3% from its historic high)
--$90 oil is not bringing down the U.S. market, or emerging markets.
--Financials, the largest part of the S&P (20%), are down 10% this year, but they are not bringing down the overall market.
--Consumer discretionary stocks (home builders, retailers, autos) are down about 8% this year, but they are not bringing down the overall market.

So, what WILL bring down the market? The answer is, a significant slowdown in global growth, which we are not seeing to any appreciable extent. The IMF's latest global report only trimmed global growth slightly, from 5.2% to 4.8% for 2008. Growth in Russia, India and China will continue to be what matters, and for the first time China and India will be the two largest contributors to global growth in 2008.

Consider:

--China Q3 GDP grows 11.5%, and the markets there DROP because traders are afraid the government will keep aggressively raising rates to SLOW the economy.
--Company after company, from Black and Decker to EMC to Anheuser Busch to DuPont to Whirlpool have said that global sales are up, much of the time double digits. Companies like DuPont have been able to raise guidance despite poor U.S. sales. They said that strong revenue growth in all segments outside the U.S. "more than offset lower U.S. demand." Sales outside the U.S. were up 11%, U.S. down 2%.

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If that kind of positive commentary withers, then you will see the markets drop. But a lot of evidence still supports the global growth thesis.

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