Overall in investment terms, I’m still cautiously optimistic though I would emphasize that word cautiously. I currently don’t see any obvious immediate drivers pointing towards a sharp slowdown. My default hunch is that we are – as I have said before – mid-way through a pause for growth or a slowdown before a late 2019 rally. This receives some backing from funds flow data which shows that there’s been a rally in risk-on assets. According to analysts at Deutsche Bank in the US we’ve seen a ‘large rally’ in risk assets for three weeks now. Crucially in the last week, we’ve seen the first major evidence of inflows into equity funds, following three straight weeks of inflows into corporate credit funds.

According to Deutsche last week equities overall experienced net inflows of $6.1 billion across every region – with EM (+$1.5bn) experiencing the largest inflow since February of this year. European inflows were driven by the UK (+$1.6bn) funds. Overall the Deutsche team reckons that “positioning remains near neutral, with systematic strategies overweight and discretionary investors still somewhat underweight. Positioning at neutral remains above levels indicated by current growth, but recent data has bolstered hopes of a rebound.” That sort of sounds about right to me – I’d say that was cautious optimism.

But there are some more obvious signals flashing amber, at least, if not red – notably earnings expectations. This week Charles Ekins of EkinsGuiness published a very handy summary of where we are in terms of corporate profits growth – with the overall message looking a bit bleak. As the table below shows across most sectors, earnings estimates are still largely in the red in most regions. The only positive story seems to be for IT and to a slightly lesser degree, healthcare.

According to Ekins, “Global Earnings expectations have deteriorated over the last four weeks” with Oil & Gas, Basic Materials and Industrials experiencing the largest falls while Technology and Healthcare have seen modest increases (especially in the USA & Japan). Crucially every region has seen a fall in earnings expectations – apart from Asia which is flat.

Global Earnings Expectations

The second graphic below highlights the individual stocks experiencing the strongest earnings upgrades – note the prominence of Tesla and Spotify. I’m currently long Spotify and starting to look again at Tesla.

Global Stocks with the largest Upgrades: