It is barely two weeks since the IMF revised down its “too low for too long” 2016 global GDP forecast to 3.2%. Last week’s economic releases in the U.S., Eurozone and Japan were generally mildly disappointing, but yet risk markets continue to rally on generally improving investor sentiment about the global economy. What is going on? In the first of this week’s articles, RIchard Barwell takes a look at growth expectations, and posits that the recent improvement in sentiment is more related to diminishing tail risk fears than increasing central case optimism.
The U.S. earnings season is now well underway. U.S. corporate earnings have been falling for four consecutive quarters, and this weakness poses a key risk for equity markets. In the second of our articles, Uma Rickheeram turns the spotlight on U.S. earnings, finding significant sectoral disparities, some signs of overall stabilisation but that evidence of a strong rebound in capital spending intentions remains as elusive as ever.
Lastly, Steve Friedman looks at the old question of whether the Federal Reserve’s monetary policy setting has been influenced by the electoral cycle in the past, and addresses the issue of whether this year might be different, given the populist policies of some of the candidates and calls for restrictions on the independence of the Federal Reserve. He draws some robust conclusions.
We hope that you will find these three articles both informative and thought-provoking.
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