Current financial market signals- April 2019

Set out below is the latest update from one of our research partners, Ineichen Research & Management (IR&M) as at 10 April 2019.

 

Observations
The key take outs from this month are:

  • Overall changes in this update remain positively biased.
  • Nearly everything macroeconomic remains “worsening”. OECD leading indicators and GDP forecasts, generally remain falling.
  • The recent mild fall of earnings estimates is stalling.
  • CPI and PPI remain falling, generally, but were stalling in March.
  • US recession probability continues to rise; US consumer confidence fell sharply.
  • Notable was the Japanese business sentiment falling to the same level as July 2008.

 

The table below summarises the IR&M economic models, macro surprises, earnings and IR&M’s perceived economic trend and some technical stock market trend indicators. Changes vs last month are circled.

Looking at each of the factors, broadly from left to right, the first five columns set out IR&M’s interpretation of various recent economic data released in those counties and whether it is generally improving or deteriorating. The EPS change column in the middle is a very important indicator of whether profits estimates for the next year are rising or falling. The final three columns look at the momentum (or technicals) in the various global share markets.

The Risks?

Over the month the sum of ticks rose. This was the strongest “tick rise” since 2014.

The US and China had the biggest upturn in ticks across long term price momentum signals and PMI economic momentum.

 

March 2019 bottom line tally:

 

What about Australia?
According to Ineichen’s data:

  • Economic momentum remains worsening.
  • Macro surprises have been positive since last February.
  • Earnings estimates have not changed materially since February, it’s worsened a bit in Financials.
  • Long term price momentum for the two composite indices reversed to positive four weeks ago.
  • GDP forecasts for 2019 have fallen from 2.8% to 2.3%, forecasts for 2021 start at 2.6%

 

 

Points of Interest

 

 

 

 

Source: Ineichen Research & Management
IR&M is one of several research sources that guide our investment decision making. They are Swiss based and provide a detailed global view of the many drivers of investment markets. Like us, they believe that in the long run investment returns are driven by the fundamentals (the prices today will ultimately revert to what various things fundamentally ought to be worth) but in the short term may be driven more by sentiment and momentum (otherwise known as “technical” signals).

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