O'Donoghue on North America

ON NORTH AMERICA

Recent speculation about an imminent end to the Federal Reserve's quantitative easing measures might have troubled investors and triggered a downturn in global equities, but US equities have continued to rise.

This is mainly attributable to the ever-improving economic data. Most notably, the Case-Shiller index of house prices is, at last, starting to tick up for the first time since the 2008 crash, and prices are now in the region of 2003 levels. A pick-up in the housing market not only contributes to GDP via construction, there is also a powerful multiplier effect in new home owners’ spending on durable goods. And with consumption accounting for 70% of US GDP, the wealth effect of higher house values is positive for improving sentiment and keeping consumer spending steady, both of which ca...