If the world economy gets pulled out of recession, it will likely be from consumer spending. The U.S. economy is the largest in the world and consumer spending accounts for approximately 2/3 of our economic activity. A reviving U.S. consumer will be a big help not just domestically but globally.
The U.S., however, is not in the midst of a consumer spending boom and the prospect for one does not seem to be on the horizon either. The ongoing consumer spending boom that I am referring to is going on in China. This year, China expects to overtake the U.S. in auto sales, refrigerators, washing machines, and desktop computers. The biggest consumer market in the world in a few years may no longer be the U.S.—it will be China.
The “new normal” that Bill Gross likes to talk about is going to be a global investment marketplace, not one that is focused on the U.S. only. Globalization already has all kinds of problems and the increasing pace of globalization will create even more issues that investors will have to deal with. It may not be comfortable to move toward a global investment policy, but it might be the only way to earn a decent return.
