I am a big believer in the notion that the stock market discounts forward earnings, which is the time-weighted average of consensus expected earnings for the current and coming years. Forward earnings is an excellent 12-month leading indicator of actual earnings when the economy is growing.
However, it doesn’t provide any advance warnings of recessions. If you agree with me that a recession is unlikely over the next 12-24 months, then the record high in forward earnings is a good omen for profits, the economy, and stock prices. It tends to be a good leading indicator of the Index of Coincident Economic Indicators too.
Today's Morning Briefing: Global Tour de Force. (1) Rolling out our global perspective on earnings. (2) Four starters: S&P 500, MSCI-Japan, DAX, & MSCI-China. (3) Forward revenues and earnings data confirm global slowdown. (4) OECD leading indicators show some life in Europe, but not in BRICs. (5) Abeconomics gives big boost to earnings expectations in Japan. (6) Revenues are surprisingly good in Germany as earnings mark time at record high. (7) Revenue growth down sharply over the past two years in China. (8) China’s leaders want fewer “glitzy” government buildings. (9) FRB-SF study says Fed policy may be boosting unemployment! (More for subscribers.)
However, it doesn’t provide any advance warnings of recessions. If you agree with me that a recession is unlikely over the next 12-24 months, then the record high in forward earnings is a good omen for profits, the economy, and stock prices. It tends to be a good leading indicator of the Index of Coincident Economic Indicators too.
Today's Morning Briefing: Global Tour de Force. (1) Rolling out our global perspective on earnings. (2) Four starters: S&P 500, MSCI-Japan, DAX, & MSCI-China. (3) Forward revenues and earnings data confirm global slowdown. (4) OECD leading indicators show some life in Europe, but not in BRICs. (5) Abeconomics gives big boost to earnings expectations in Japan. (6) Revenues are surprisingly good in Germany as earnings mark time at record high. (7) Revenue growth down sharply over the past two years in China. (8) China’s leaders want fewer “glitzy” government buildings. (9) FRB-SF study says Fed policy may be boosting unemployment! (More for subscribers.)
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