23 to 29 April: Pique or Peak

After 18 months of perfect calm, global equity markets have traded lower and with increased volatility since late January. Indeed, even over the past few weeks during which corporate earnings for Q1 have come in well-ahead of expectations, stocks have struggled. Is this a fit of pique or have markets peaked for this cycle?

Excluding a number of emerging countries, we believe economic conditions for this cycle have seen their best days; corporate margins, policy stimulus and growth have already touched their highs. Recent price action is therefore rational as investors have readjusted their forecasts as incoming data has suggested the good times cannot last forever. However, we believe global indices will trade to new highs. It might be long in the tooth, but the party is not over yet.

This week there is an FOMC meeting and the April employment report in the US. Japanese markets will be mostly closed for Golden week.

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