Editor’s Note: At the end of January, the article India: A True Friend suggested investors buy Indian small caps. Since then, the iShares MSCI India Small Cap (SMIN) gained 27 percent. Although India’s long-term potential remains robust, such a profit ought to be taken. Sell iShares MSCI India Small Cap.
Four months into the year and the global economy is in the midst of synchronized growth that should allow it to grow around 3.5 percent this year. China’s solid growth, India’s recovery after the monetarization jitters and the eurozone’s stronger-than-expected growth have been the catalysts for the strong showing this year.
Germany is Europe’s economic engine. Its economic growth should remain on a solid trajectory, and the rest of the Europe will most probably follow. As the chart below indicates the Ifo Business Climate Index increased by 0.6 points to 112.9 in April. The index now stands at its highest level since July 2011.
European economic activity indicators point higher as well, with the Eurozone Composite PMI reaching a six-year high this month. Politics aside, such a trajectory suggests GDP growth will be closer to two percent this year and certainly higher than last year’s 1.7 percent.
Global economic activity should start to converge to the survey data, which has been very upbeat. Furthermore, the recovery in emerging markets seems to be broadening in scope. Big countries like Russia and Brazil are expected to experience positive GDP growth this year after 2016’s disappointing slowdown.