The rebound in global equities since late-March has hit a bump in the past month. We remain concerned about the lofty expectations for corporate profits relative to the challenging economic backdrop, and have recommended a cautious approach to equities in the near run.
In addition to updating our view on the major asset markets and investment strategy, a just-published report examined the corporate profit outlook in detail and concluded that risk asset markets were still well ahead of the fundamentals. The implication was that the recent consolidation phase in equities would persist in the near term. Moreover, the conditions that would warrant a full-on pro-growth investment posture and broad-based rotation from recent market leaders to more cyclically-sensitive laggards are still not on the horizon.