Set out below is the latest update from one of our research partners, Ineichen Research & Management (IR&M) as at 17 October 2019.

Observations
The key take outs from this month are:

• Overall changes in this update were positively biased. Although not much has changed since our last update.
• Only 44% of regime tests were positive which compares to 38% in our update from September.
• Economic, business and sentiment remain falling. Earnings estimates are falling too.
• The MSCI World remains close to its all-time high, whereas the global economy isn’t.
• PMIs remain falling sharply, even in the US.
• CPI and PPI are falling. Central planners seem to have everything under control though.
• Global GDP growth rate, industrial production, exports, PPI and most sentiment gauges remain worsening.

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 fell by one.

Japan continues to exhibit the least amount of ticks, joined by Germany, with the long-term consumer discretionary momentum turning negative.

US and China were the best performers with 8 ticks each, which is a bit odd.

What about Australia?
According to Ineichen’s data:

• Australia remains improving.
• Economic momentum remains in positive territory.
• Macro surprises remain positive since late February, only intermittently negative during a couple of days in July.
• Earnings estimates worsened materially in the July update and have worsened further in this one.
• Long term price momentum remains mostly positive.
• Australian business confidence has fallen sharply.

Point 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