Chart Of The Week: Global Equities Going Ex-Growth?
Callum Thomas | May 04, 2022 12:27AM ET
Global Earnings Revisions — Market Going “ex-Growth“? This chart shows the breadth of earnings revisions momentum (ratio of upgrades to downgrades and rate of change in forward earnings) across all the countries that the data is available for (using Refinitiv I/B/E/S data—the gold standard in analyst consensus earnings estimates). Basically it shows the pulse in earnings revisions at a global level.
The key point is across countries there is a clear loss in earnings momentum. There was the initial drop during the pandemic panic, followed by a massive surge thanks to stimulus and reopening. Pandemic winners e.g. tech, also saw a substantial one-off surge in earnings as the global wave of lockdowns and work-from-home triggered a mass-adoption of tech and sped up a number of existing trends.
But now those tailwinds have been and gone, and what’s worse: the past stimulus tailwinds are now turning to headwinds as central banks hike rates, bond yields surge, and cost pressures bite as an inflationary shock takes hold. And for earnings growth, we know the base comparator matters, and now the hurdle for achieving the same rate of growth has been set higher.
In many ways then the market is moving into a period of “ex-growth“, as those past boosters to earnings now come home to roost as long-term symptoms of the pandemic. You might say that earnings are set to suffer the effects of long COVID! With that comes the end of the stimulus driven bull market.
Key point: Global Equities risk further downside as the market goes ex-growth.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.