US | Q1 earnings: upward revisions continue for now
US earnings growth continues to surprise to the upside, with more cyclical sectors leading the way in the Q1 earnings season. This positive momentum supports our existing overweights on Financials, Materials and Industrials.
However, longer-term expectations appear overly optimistic. The bottom-up consensus points to an ongoing profit margin expansion over the next few years and we think this is unlikely against a backdrop of rising cost pressures and proposals for higher corporate tax rates.
We see scope for downward revisions to EPS forecasts as attention turns towards 2022 later this year, and this could prove a headwind for US equities in the context of elevated valuation multiples.
UK: Sterling’s woes, Kwarteng’s vows, Bailey in the middle
The negative market reaction to last week's fiscal announcements appears to be a function of doubts over the credibility of the UK government's long-term fiscal plans. Though we think the structural position is not as bad as last Friday's drop in asset prices implies, it's clear the government will struggle to retain credibility if it fails to engage with market concerns.Find Out More
BoJ to look through a temporary decline in monetary base
The Bank of Japan (BoJ) left monetary policy unchanged at today's (22nd Sep) meeting, maintaining current short- and long-term interest rates, despite another wave of yen weakening and upward pressures on JGB yields.Find Out More