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...
31 October 2016

BOE leadership: Carney's conundrum.

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...
15 March 2016

Corporate profits - Too early to call an upturn.

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 February 2017

Earnings estimates stuck in low gear.

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...
22 November 2016

Earnings revisions: Gap widens between U.S. equities and earnings 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...
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...
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...
28 August 2016

Equity valuations – party like it’s 1999... and 2007?.

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...
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...
12 September 2017

Interesting times for central bankers.

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...
3 May 2017

Sector view: Boring old insurance.

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...
24 October 2016

US and European earnings trends: Better to travel than to arrive.

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...
15 February 2017

Yellen’s hawkish testimony: Rate increases ahead.

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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