Current market commentary
While economic data in the US has not been able to surprise positively on average, unlike in other regions, the positive earnings revisions continued globally - particularly in commodity-heavy regions such as Latin America and Eastern Europe. For Latin America, earnings growth of more than 200% is now even expected for this year. Accordingly, emerging market equities outside Asia have also outperformed recently. In our view, the market is likely to remain in a “wait-and-see” mode over the next few months until it becomes clear how the Fed will act and what Joe Biden can actually implement of his stimulus plans. While surveys show that investor sentiment has recently risen significantly, the options market suggests that investors are hedging more. We see this as supportive, along with the still high holdings in money market funds and steady equity fund inflows. Without an external trigger, we do not expect a stronger correction.
Short-term outlook
The next few days will be dominated by central banks. The ECB meets on June 10, the Fed on June 16 and the BoE on June 24. With the end of the Covid-19 crisis on the horizon, the economic recovery is likely to gain further momentum and central banks will begin to discuss at what point the flood of money should be curtailed. The markets are likely to watch this with a wary eye. On Tuesday, the ZEW index (Jun.) and industrial production (Apr.) for Germany and retail sales (Apr.) for Italy will be published. On Thursday, industrial production data (Apr.) for Italy, France and Spain and consumer price inflation (May) for the US will follow. We conclude the week with U.S. consumer confidence (Jun.) and U.K. industrial production (Apr.) on Friday. In the following week, retail sales (May), industrial production (May) and several economic sentiment indices for the U.S. will be published.