Market Insight: "Go big, or go home": The US economy is becoming increasingly dependent on Wall Street
Wealth, consumption and financing of the US trade deficit are becoming increasingly dependent on the stock market. A downturn could hit the USA in several ways, says Jakob Blume.
The US economy is living beyond its means, with a trade deficit of $246 billion in the second quarter, according to a Commerzbank analysis. The deficit is being financed increasingly by volatile foreign investment in US stocks, rather than bonds, with twice as much foreign capital flowing into US stocks as bonds in the past quarter.
This trend poses a risk to the US economy, as a correction in the stock market could lead to reduced capital inflows and a slowdown in economic growth. The US economy is heavily dependent on the stock market, with household wealth tied closely to stock market performance, and a fall in the market could impact consumer spending and the value of the US dollar.
Written by urgent.news from Handelsblatt's report — not a translation of it. Machine-written — may contain errors; check the original before relying on it.
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