The headwinds and tailwinds for US equities

While the US equity market generally depends on domestic US economic circumstances and usually leads global equity markets, we have just witnessed how Brexit unnerved most capital markets, despite the fact the UK economy contributes less than 4% to global GDP.

In our view, the US (and other major capital markets) is predominantly anchored to two main economic drivers in terms of its strategic direction - the consumer markets of the world's two largest economies, the US (mainly) and China. Domestic consumer expenditure makes up 69% of the US GDP, with total services making up 88% of GDP. Chinese consumption is in a strong growth trajectory, with retail sales growing at 10% and in absolute value within 10% of US retail sales. It is also of value to recall that the absolute value of the growth in China's GDP exceeds the total growth in the com...