After a sharp drop in US GDP in 2008 and early 2009, US GDP showed surprising strength in the fourth quarter of 2009, with an advance estimate showing a rise of an annualized rate of 5.7%. Whether or not this growth rate can be sustained will depend largely on whether or not there is an improvement in the unemployment rate, as US unemployment currently hovers around 10%.

The US Federal Reserve has used all possible tools at its disposal in an effort to jumpstart the economy. The Fed funds rate has been lowered to a target of 0-0.25%, with the Fed saying that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” The Fed has continued to purchase agency debt in the market, including $1.25 trillion of agency mortgage-backed securities and $200 billion of agency debt in an effort to promote economic recovery, and expects those purchases to be finished by the end of the first quarter of 2010.

The Canadian economy didn’t fall as hard as the US, but it experienced a recession nonetheless. Canadian GDP fell 0.6% in the second quarter of 2009, although it showed modest growth in third and fourth quarters. Although Canadian fundamentals are comparatively strong, the recovery is being hindered by the ongoing strength of the Canadian dollar. The dollar has steadily increased from its low of about US $0.77 to a high of US $0.97 in October, and traded around US $0.95 at the end of 2009.

China has been one of the few bright spots in the world economy, maintaining its rapid GDP growth. It grew at a rate of 8.9% in 2009. In early 2009, the Chinese government initiated a significant stimulus package, helping to maintain its huge consumption of raw materials including energy and the components of steel. However, recently China has begun tightening its monetary policy to protect against inflation.