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The first month of 2018 looked a lot like all of last year, with U.S. stocks fighting their way higher and even the slightest pullback being quickly met by a large influx of new buying, especially in Index Funds. Canada, once again, is lagging due to some more weakness in energy stocks despite the move higher in oil prices to the best level since 2014. One of the reasons 2017 was a good year for the markets was because the economy accelerated globally. There are signs of sustainable growth everywhere; the momentum will continue for a while. U.S. gross domestic product is likely to be lifted somewhat this year because of the tax cut. It should benefit economic growth beginning early in the year; but we’ll find out if the impact is lasting. However, Europe and Asia are also experiencing decent recoveries, due both to the lagged impact of all the monetary easing (zero interest rates do eventually work, as proven by the move in the U.S. economy). The chart below shows the movement in the Global PMI (Purchasing Managers Index) over the last 18 years. Following the sharp recovery after the Financial Crisis in 2008, growth slowed down to a moderate pace of the past eight years. Now we are beginning to see a clear pick up. What’s important to remember is that economic growth, unlike stock market psychology, gains strong momentum in either direction and rarely reverses quickly. This suggests that the only way we well see a slowdown in this growth is if the monetary authorities (central banks) start to tap on the brakes a little harder by raising interest rates more quickly and aggressively than expected. (more…)