Market Outlook: 12-26-07

Robert Hsu, December 26, 2007

I hope that you had a wonderful holiday and are recharged and ready to get back to business -- I know I am. There are a few things I'd like to tell you about today before we get to the updates on our companies. We need to do a quick check on the U.S. economy to see what sort of a position we're entering 2008 from and then we need to cover some interesting developments in Asia.

Overall, I think we're at an inflection point for the U.S. economy. The big question that will determine which way the market will go from here is whether the downturn in the U.S. financial services industry will create a long-lasting or temporary negative impact on overall corporate earnings. In the past several weeks, Asian investors have injected significant amount of liquidity and bought stakes in troubled Wall Street firms. Citic Securities, China's largest stock brokerage firm, made a $5 billion investment in Morgan Stanley, and Singapore's Temasek Holdings made a similar investment in Merrill Lynch. These liquidity injections not only help financial services companies, they also show that Asian investment firms have become major forces in international finance.

Consumer spending in the U.S. is still robust for now. Spending rose more than forecast in November, alleviating concerns that the U.S. economy is going into recession. Purchases gained 1.1%, the biggest gain in more than two years. Personal incomes also advanced, rising 0.4% last month. However, the November spending boom may not be sustained. Holiday sales declined in the seven days ended December 15 for the third straight week. According to the National Retail Federation, this year's holiday season may be the weakest since 2002. In the longer run, U.S. consumer spending will likely slow down as baby boomers enter retirement age and reduce their spending habits. On the bright side, there will be over 400 newly-minted middle class Asians under the age of 45 ready to pick the slack left by aging U.S. boomers over the next 15 years.

What it comes down to is that although we will probably have an economic slowdown in the U.S. in 2008, I don't think we'll go into a recession. The rest of world, led by Asia, is growing too fast for the U.S. to get into too much trouble. Learn how to profit in the fast-growing Asian economies by joining Asia Edge today!

A Snapshot of Asia

There is a lot to look forward to in 2008. Asian economies outside of Japan continue to move from strength to strength. China is preparing to show the world its new economic prowess in the Beijing Olympics next year. As oil prices hover near $100 a barrel, Russia is reemerging as a major world power. India continues to expand while South Korea's new president elect promises to turbo charge the Korean economy. During my travels to Asia this year, I saw a confident and booming economic block spearheading global growth in the 21st century and I'm excited for the investment opportunities ahead.

To get the latest updates on the market and which stocks Robert Hsu is recommending now, join Asia Edge.