Global earnings accelerometer

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Global earnings accelerometer
With the swings in sentiment and price over the last couple of weeks it’s important to keep sight of some of the trends in the fundamentals. Particularly so as a lot of markets are looking shaky short-term, with divergences showing up and key levels looking close to being breached.
Indeed, last week I outlined the elevated near termdownside risks for global equitiesgiven the bearish breadth divergences.
But the chart below shows that even if we do get a correction or selloff it may not be time to panic. Here’s a look at the degree of global equities earnings acceleration.

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The chart, which appeared in the latest edition of theWeekly Macro Themes, is what I call a global equities earnings accelerometer because it tracks the number of countries seeing a material acceleration in forward earnings growth.  The blue line is the proportion of countries with forward earnings growth greater than 10% YoY.
What’s interesting about the chart is the contrast between the pre-crisis credit-fueled boom times where emerging markets were partying and rising house prices across developed economies saw debt pile up. The post-crisis period saw stagnant growth as a rule with the hangover of the crisis lasting years.
But now there is a very interesting breakout in earnings growth, so while we might get a correction or selloff it will be important to keep indicators like this in mind as we continue to assess the evolving outlook and weigh the odds of risk and return.
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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.
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