5 May 2017

Not really an economic surprise....

Economic surprise indices and raw materials prices rolling over in Q2

One of the notable features of improving sentiment in global stock markets over the last 6 months has been its reliance on ‘soft’ economic data and a continuation of positive surprises. We cautioned in March that economic surprise indices were both seasonal and mean reverting and also highlighted the tightening of monetary conditions in China, historically linked to declines in iron ore prices. Six weeks later, global economic surprise has rolled over outside Europe while energy, coking coal and iron ore prices are falling sharply.

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17 March 2016

Was there a "plaza" accord after all?.

Economic surprise indices and raw materials prices rolling over in Q2

One of the notable features of improving sentiment in global stock markets over the last 6 months has been its reliance on ‘soft’ economic data and a continuation of positive surprises. We cautioned in March that economic surprise indices were both seasonal and mean reverting and also highlighted the tightening of monetary conditions in China, historically linked to declines in iron ore prices. Six weeks later, global economic surprise has rolled over outside Europe while energy, coking coal and iron ore prices are falling sharply.

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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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