Global Stocks Head Higher but Worries Linger

Global stock indexes hit one-month highs on Wednesday after a bullish note from Jerome Powell who testified before Congress on Tuesday. A strong run of earnings reports also increased investor optimism, boosting the dollar and sending gold prices to one-year lows.

Wall Street indexes closed higher on Tuesday, sending positive vibes rippling through Asia and Europe. The Dow Jones Industrial Average has now headed higher for four consecutive sessions and 11 out of the past 13 days. The Nikkei 225 ended up 0.43 percent on Wednesday and the ASX 200 ended up 0.67 percent higher. The Shanghai Composite and Hong Kong’s Hang Seng Index both ended lower, but that didn’t stop European index from joining the party. France’s CAC was up 0.54 percent as of 1:06 p.m. GMT. The FTSE was up 0.62 percent and the DAX was up 0.72 percent.

Is There a Reason to Worry?

Despite the recent positive reports and market movements, some U.S. policymakers are concerned that the United States is not adequately prepared to handle another economic crisis. Speaking on Tuesday at a roundtable forum, former Federal Reserve Chairman Ben Bernanke and former Treasury Secretaries Timothy Geithner and Henry Paulson shared that they worry that Americans have forgotten the lessons learned after the 2008 financial crisis.

Of specific concern to these policymakers are the current efforts to repeal portions of the Dodd-Frank Act which was passed to increase government regulation of the financial sector and prevent banks from acting in risky ways. The policymakers warned that while the current efforts seem fairly reasonable at the moment, there is a risk of allowing to much leeway to financial institutions which could become risky in the future.

Bernanke also expressed concerns about the country’s increasing deficit, noting that tax cuts and fiscal stimulus may have been ill-timed during such a strong economic period. Likewise, higher debt and deficit levels could provide less of a buffer if a stimulus program is needed in the future.

The biggest concern of the policymakers was the current U.S. debt which is now 77 percent of the country’s gross domestic product, double the level it was in 2007. They warned that this debt must be dealt with quickly, or it will slowly derail the U.S. economy.

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.