29 June 2017

A tipping point as monetary policy shifts.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
4 November 2016

BOE: Bank on track.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
16 February 2017

C'est l'économie... French and German bond yields diverge.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
14 May 2017

Earnings forecasts: a short-term support for markets.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
16 August 2016

Earnings forecasts: Reassuringly stable?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
16 August 2017

Earnings momentum remains stable for now.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
16 January 2017

Earnings Revisions: Waiting for upgrades?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
9 October 2017

Economic data surprising to the upside in Q3.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
21 June 2017

Equity risks are rising: economic surprises turning lower.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
17 July 2017

Fed policy: Don't forget your flip-flops.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
12 June 2017

Fed rate decision: One and done - or not done?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
23 February 2017

FOMC minutes: Fairly soon = March or June?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
14 November 2016

Forward guidance - Trump style.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
24 April 2017

French Election: Is populism already passé?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
10 August 2016

Gilt shortage: It takes two to tango.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
21 September 2016

Just don't mention the yen.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
16 March 2017

Just what the Fed wanted.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
23 March 2017

Market wobble? Still time to re-position portfolios.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
11 August 2017

North Korea: A problem not of Trump’s making.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
5 May 2017

Not really an economic surprise....

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
19 October 2017

Profits forecasts stable – but no positive surprises.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
13 March 2017

Ready for the rollover?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
10 November 2016

Trump's double surprise.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
1 September 2016

UK economy and corporate profits: Refusing to follow forecasts.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
21 September 2017

US rates: Has the fuse been lit?.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
9 January 2017

Valuations trump noisy narratives: increased caution on global equities.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
1 June 2017

Volatility: Low, but downside protection in demand.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
5 December 2016

You can’t be given a bloody nose twice.

Stronger PMI indices not following through to profits growth

While Q3 has brought something of a renaissance in economic surprise and purchasing managers’ indices we can at present see no sign of this improved sentiment in profits forecasts for 2017. Our weighted average consensus earnings forecast index remains steady for each of the UK, US and Europe ex-UK and the equal-weighted measures have declined, if modestly, since mid-year. In prior periods, our earnings forecast index tended to move slightly ahead of PMIs and economic surprise. The more recent data has not followed this pattern and highlights that what is good for the overall economy is not by necessity good for corporate profits. Furthermore, with central banks on a tightening path the risk for equity markets is that tighter policy is not offset by stronger profits growth.

Read more...
Sector report cover
21/09/2017
Illumination: Equity strategy and market outlook September 2017

In this month’s strategy piece, Alastair George believes resilient forecasts for profits growth in 2017 keep the equity bears at bay in the short term. Though a modest degree of weakness in consensus earnings forecasts has appeared recently, earnings growth for developed markets is still forecast to be close to 10% in 2017. However, valuations across credit and equity markets highlight the need for caution for the medium term. Risk premia remain, in our view, compressed by central bank policy and are at levels that are unusually low on a historical basis. For the euro, it is perhaps a Goldilocks era as the strength of the currency taps the brakes on exporting nations, allowing other eurozone members, where there is less inflationary pressure, to remain beneficiaries of ultra-loose monetary policy for longer. We expect the ECB to aim to maintain the euro close to current levels. We continue to believe portfolios should be cautiously positioned.

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