Head of Equity Strategy
Summary: After a wretched end to 2018, equities have been on a roll so far in the new year. The upcoming earnings season might just extend that rally further, despite growing signs of fragility in the wider economy.
The Q4 earnings season kicks off on Monday with Citigroup reporting its latest batch of figures. This earnings season may be more important than usual given the disastrous Q4 for global equities. Uncertainty remains high and the outlook has definitely deteriorated with especially China and Europe leading the declines. Today’s Sweden House Price Index (Dec) showed further deterioration in what is now the country's worst housing decline since the early 1990s.
We observe weakness in other housing markets across all continents. On top of that, high yield bond issuances have been stopped completely for 41 straight days. Targa Resources may break the stalemate in the US high yield market if it succeeds in its $1.5bn bond offering on Thursday. With global equities rallying since late December, and especially after Fed chair Jerome Powell's speech on January 4 signalling a looser stance on balance sheet reduction, as well as and optimism over US-China trade deal, a better than expected earnings season could help extend the rally a couple of percentage points more.
Share buybacks are still intact
Despite a volatile Q4 and rapidly falling share prices, S&P 500 companies were not afraid of using the ammunition on their balance sheets to buy back their own shares. The index divisor capturing the changes in the stock capital is still rapidly falling as a function of the enormous shares buyback programmes. Q4 2018 saw the biggest decline in the index divisor since Q2 2016. In European equity markets there is not the same engine as the index divisor is not continuing to decline. This obviously reflects the lower growth, lower profitability and less robust condition of European companies compared to US companies.
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Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.
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Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.
Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.
The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?
The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.
Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.
