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Economic Growth Momentum Remains Solid With Economic Data Continuing to Beat Economists’ Forecasts

Investment Navigator - March Newsletter

March 6, 2018

The spike in market volatility experienced in early February started to fade over the past couple of weeks and major stock indices have retraced 50% or more of their recent pullback. Given market volatility consistently remained at very low levels for an unusually long stretch (18 months) until late-January, we believe market positioning became unbalanced over the past year-and-a-half, leading to the sudden 10% correction a few weeks ago. However, we see this weakness as transient, set against a strong medium-term outlook for market fundamentals. In particular, economic growth momentum remains solid with economic data continuing to beat economists’ forecasts, leading to growth forecast upgrades for this year and next. This has fed into corporate earnings growth estimates running at double-digit rates for 2018, supporting equity valuations. With valuations having returned to more attractive levels, we see
the recent pullback in equity markets as an opportunity to put some cash allocations to work.

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