The American economy continues to do better than the rest of the world. This attracts a lot of money to the United States, pushing up stock markets and the dollar. For example, between November 5 and 13, U.S. funds, such as ETFs and mutual funds, attracted nearly $56 billion, the second largest weekly inflow since 2008. That’s impressive. Most investors are betting on the American economy.
Even before Trump, the situation was already favorable, thanks to Biden’s results: relocation of businesses, control of inflation, energy transition, investments in artificial intelligence, etc. Since the last election, this is even more true, as the budget deficit is expected to remain high (around 7% of GDP), which continues to stimulate the economy and encourage productivity.
On the other hand, in Europe, things are different. Debt is mainly used to finance current expenses and to preserve a social model which needs to be reformed, instead of being invested in projects that generate wealth.
The strong dollar, thanks to the attractiveness of the American economy, should remain a reality. This can pose a problem for certain emerging countries which often borrow in dollars. Fortunately, the situation has improved compared to ten years ago. These countries have strengthened their economies, better managed the Covid crisis, and reduced their dependence on dollar financing.
Take Argentina: not long ago, it was close to bankruptcy. Today, growth is restarting, inflation is under control and the budget deficit, which reached 6% of GDP, should disappear next year. This required major efforts, such as reducing public spending (while preserving household support), but the positive effects are there. The central bank also intervened to stabilize the currency.
Turkey has followed a similar path: its credit rating has improved, it has a tighter monetary policy, inflation is controlled, and its economy is less dependent on the dollar. It monitors its exchange rate through occasional interventions by the central bank.
Finally, unlike past periods of strong dollars, this time, emerging countries are doing better. As of 2024, none of them have gone bankrupt, and that seems unlikely for next year. This is good news.
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