Economics and markets

2022 economy and markets: 4 things to know

December 03, 2021

U.S. equities more overvalued than any time since the dot-com bubble
U.S. equity valuations are well above their fair-value range
The illustration shows the cyclically adjusted price/earnings ratio for U.S. stocks trending above its fair-value range by the greatest degree since the years before the dot-com bubble in the late 1990s and early 2000s.
Markets may underestimate how high the Fed may raise rates
China housing defaults unlikely to cause global financial contagion
Uneven regional impacts from a rebalancing Chinese economy
The illustration shows the degree to which various economies are affected by a 1% increase in China’s official GDP as well as in old economy and new economy indexes. The effect is greatest on Brazil, with a 0.42% response in official GDP, a 0.26% response in the old economy index, and a 0.21% response in the new economy index. The response for South Korea is 0.16% in official GDP, 0.09% in the old economy index, and 0.18% in the new economy index. The response is minimal in developed markets, including the euro area, Canada, the United States, and the United Kingdom.
A variant keeps COVID-19 well in the economic discussion
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