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Economic & Market Outlook  

May 2018

 April was another volatile month in the global equity markets but it basically finished flat.

Given the market's recent pullback and surging profits, the S&P 500 has become less expensive. The forward P/E multiple is now just slightly above the 25-year average of 16.1.

Volatility is moving back towards historical averages as equity prices have fluctuated dramatically this year.

Earnings results are at their best levels in years, but equity markets have struggled to gain traction.

On May 2, the Fed highlighted that inflation was moving closer to its 2% annual target. A June rate hike is now almost a certainty.

Higher levels of Treasury issuance from additional federal spending, combined with the Federal Reserve balance sheet wind down, are likely to put more upward pressure on interest rates.

Rising rates make equities less attractive. Higher yields on ultra-safe government bonds can sap demand for stocks, while rising rates can also weigh on corporate profitability by increasing borrowing costs.

From a fundamental standpoint, a synchronized global growth backdrop combined with accommodative monetary policies should provide support for global equities.

We favor international equities based on improved economic growth and attractive valuations relative to the U.S. markets.


  • This information has been compiled using data and other statements of fact derived from sources which we believe to be accurate and reliable. However, such data and other statements of fact have not been verified by us, and we do not make any representations as to their accuracy or completeness. Any opinion expressed herein reflects our judgment at this date and is subject to change.

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