The guessing game continues

The OECD added this week to concerns that the global economy still faces a sluggish growth outlook as it cut its forecast for global growth for this year and the next. As has been the case with other global economic forecasters, the OECD focussed their concerns on the weakness in emerging markets.

Ten days ago the market had almost discounted any chance of the Federal Reserve moving in December, post Janet Yellen’s speech and last week’s employment data the market has once again swung back to expecting the Federal Reserve to act in December. Despite the slightly improving outlook for the US economy, fears remain that the Fed will be raising into a slowing global economy. With the wonderful benefit of hindsight perhaps the time to have started the process was earlier in the year.

We pointed out at the start of the week that the developed markets of Europe, the US and UK appeared to be accepting of a move by the Fed as the brunt of the recent pain has been in the treasury market. The indexes were also however at the top end of their trading ranges, as the week has started, once again, they drifted lower from the top of the ranges.  

As we approach the conclusion of the earnings season, companies are again demonstrating an ability to squeeze out efficiency gains in the face of weak revenue growth. Mega caps, according to Merrill Lynch, have again in line with previous quarters managed to produce more positive earnings surprises than the smaller cap counterparts. Larger caps probably have more levers to pull when it comes to finding ways to mitigate costs. The better than anticipated earnings season has helped equities prices continue to stabilise post the summer sell off.

One-way company directors have been trying to mitigate slow revenue growth is via mergers and acquisitions.  Merger and acquisition values have risen by 38% from last year and values this year are reaching the levels of 2007. According to dialogic this year they have been nearly 4 trillion dollars of deals this year.

Posted on November 10, 2015 .