The Maastricht Treaty signed in 1992 led to the creation of the European Union(EU). Since then the EU has expanded many more countries including many of the former Warsaw pact countries.The following infographic shows the evolution of the EU:
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Source: How the EU Has Changed, Sputnik News
Kyrgyzstan in Central Asia is an off-the-beaten-path tourist destination. The video below offers an introduction to this beautiful country:
The US is the top country in terms of defense spending. None of the other countries in the world spend as much on military as the US does. According to a report by National Priorities Project, in 2016 more than half of the discretionary federal spending was spent on military. To put it another way, 53% or over $618.0 billion of the discretionary budget of $1.16 Trillion went to defense.
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Source: The Militarized Budget 2017, National Priorities Project
Because more than of the spending is diverted to building weapons and other military stuff, other parts of the economy get smaller funding. For example, food and agriculture got 1%, health got 6% and transportation received 2%. High defense spending gives the country the world’s most powerful military. But lack of adequate spending in other areas leads to poor quality infrastructure, health, education, housing, etc. For example, transportation industry is a mess from roads to railroads to airports with some airports looking like third-world countries.
The economies of some countries are heavily dependent on exports while others do not. A higher percentage of jobs in export-driven countries depend on exports. For example, Germany is a classic export-based economy unlike the US which is a consumption-based economy. So 30% of total employment is attributed to exports. In the US, the figure is only 10%. Other countries like Korea, Mexico, Canada also have high number of jobs dependent on exports.
It is surprising that a lower percentage of jobs are dependent on exports in China than other countries like Mexico, Canada, India, UK, etc.
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Source: The truth about Brexit, April 2017, The Absolute Return Letter, Absolute Return Partners
The U.S. equity market has performed well in recent months especially since the election in November. The S&P 500 is up by over 5.50% year-to-date on price only basis. The solid performance of US stocks has pushed valuations to high levels. When compared to other markets, US valuations look stretched according to a report by Schroders. From the report:
Markets are clearly putting a lot of faith in President Trump’s ability to deliver on his promises. Although valuation is not a good guide to near term performance, it does become a factor on longer time horizons. From our analysis, the US is trading well above normalised valuations for Price Earnings (historic, expected and cyclically adjusted PE) and on price-to-book. Easy money and low bond yields play a significant role in sustaining these valuations, so higher inflation which threatens to change Fed policy will be critical to the market outlook.
Source: Schroders Economic and Strategy Viewpoint, April 2017, Schroders
The key takeaway is that investors must not be complacent when markets continue to rise. U.S. stocks could lag foreign stocks this year. Many of the developed European markets are ahead of US markets so far this year. So investors may want to consider diversifying their portfolio across markets and asset classes.
