Monthly Market Report - April 2018

1st April 2018

So, where are we with the global developed world stock markets – was the turbulence of the last few months a bump or something more ominous? The evidence so far firmly points to the former, the curious case of the bump. A nasty one but not unexpected. The good news is that the markets have now mostly recovered strongly from the correction in the first half of February. But as analysts at SocGen now observe, we need to focus on the FX markets moving forwards – the French bank’s analysts observe that "US dollar weakness remains centre stage, and the positive effect it has had on what are US dollar-denominated indices should not be overlooked. For the euro investor, for example, MSCI World is down in price terms over the past year and the DAX peaked in May last year, and while US earnings momentum has surged ahead on the back of both the weak USD and tax cuts, European EPS momentum is heading the other way.”

FX markets do cloud the picture, but after a few weeks of turbulence, fundamentals have started to re-assert themselves – providing a useful tailwind. Charles Stanley for instance recently brought out another issue of its earnings tracker. Its headlines? Profits are booming. According to the UK investment house "FTSE 100 reported earnings growth now stands at 44% year-on-year for 2017 with all sectors seeing positive growth. However, this is heavily skewed by Energy’s strong performance where earnings are up 99%.…Looking ahead, consensus expectations are for the FTSE 100 to see earnings growth of 9% in 2018 with Energy, Tech and Telecoms considered as having the biggest growth potential.”

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