Economic backdrop continues to improve

Here's what we're thinking

May 9, 2017

Economic data globally remains supportive for markets helping factory orders, investment spending and earnings recover to multi- year highs. As economic data has remained firm, the IMF has upgraded its 2017 global economic growth forecast to 3.5%, a significant improvement from the 3.1% estimated for 2016. The improving economic backdrop is translating into rapidly improving corporate fundamentals as reflected in double-digit earnings growth across major markets (S&P500 EPS: +12.8%y/y). With global equities having registered six consecutive months of positive returns, the widely- followed VIX volatility index fell to a 10-year low on May 1st reflecting the broad improvement in market fundamentals over the past year. To be sure, there are a variety of issues that could cause bouts of market consternation in coming weeks including economic surprises moderating as forecasts catch up to stronger data flow, China tapping down on pockets of speculation (housing, commodities, FX outflows) and disappointment over the slow pace of progress on Trump’s tax cut legislation.

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