Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Chief Macro Strategist
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Are we back to cruise mode in equities?
Peter Garnry
Chief Investment Strategist
Summary: Global equity markets are still marching higher although April has been a bit choppy. Overall, though, Q4's wall of worry has been replaced by complacency about the many problems in the global economy.
China’s stimulus policies and improving economic figures have eased concerns and renewed positive sentiment on equities. Meanwhile, financial conditions in the US have dropped to very low levels and the VIX Index is hovering around the 12.5 level which is substantially below its historical average.
That we are back to the relaxed investor sentiment is probably not more visible than in the short volatility strategies. Saxo Bank’s Head of Commodity Strategy, Ole S. Hansen, showed this chart earlier this week showing that the net VIX futures positioning in lots is back to the lows. Again we have all the ingredients for a major reset in equity markets if the right catalyst presents itself.
US earnings growth slows
The Q1 earnings season is in full swing and while the US earnings positive ratio is 79% operating profit (EBITDA) is slowing down to the lowest growth levels since Q3 2016. This was obviously expected due to the difference between macro numbers and earnings but more importantly the outlook has not surprised substantially to the upside. For now the earnings season has mostly been neutral to equities. This earnings week is all about technology earnings with releases from Microsoft, Intel, PayPal, Twitter, Facebook, Google and Amazon.
The Q1 earnings season is in full swing and while the US earnings positive ratio is 79% operating profit (EBITDA) is slowing down to the lowest growth levels since Q3 2016. This was obviously expected due to the difference between macro numbers and earnings but more importantly the outlook has not surprised substantially to the upside. For now the earnings season has mostly been neutral to equities. This earnings week is all about technology earnings with releases from Microsoft, Intel, PayPal, Twitter, Facebook, Google and Amazon.
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