Confusing signals?

We are now over 90 days into this stock market correction and market action over the past week must have enforced the view of many lay investors that understanding what makes them rise and fall is beyond rational consideration. The ongoing Q1 corporate earnings results announcements are pointing to the strongest annual growth in corporate profits that most can remember – in excess of 20% – yet stocks fell on the good news.

Corporate earnings growth: As good as it gets?

We are pleased to report that the Q1/18 corporate earnings season is shaping up to be pretty spectacular so far, even exceeding the unusually high expectations from analysts we reported 4 about a couple weeks ago. The gap between what analysts expected and what companies have reported is seems to be the result of improved profit margins and Trump’s corporation tax cuts, which filter directly through to the bottom line.

US 10 year treasury yields finally break through 3%

New Year’s Eve 2013 was the last time the yield of US-10 year government bonds yield hit 3%, until this week. During these four and a quarter years we have seen the nadir of just 1.36%, below even the post crisis lows of 2012 (annotated on the chart below).

Diplomacy vs. ‘Trumplomacy’: Geopolitical risk update

Since the start of his Presidency, Trump has made it his mission to be the great disruptor, He despises the political establishment in Washington. He also despises trade deals that he believes have compromised US interests and influence through consensus negotiations. His response? Rip them up and bully his opponent to the table on his terms.

Markets bullish on oil

At the time of writing, Brent crude oil is sitting at just under $75 per barrel, and WTI crude at $68 per barrel. Both of these are levels not seen since the commodity price bubble started deflating in 2014, and the result of a sustained upward surge since mid-2017. This is despite the fact that, not long ago, many commentators made the case that the price of oil was range bound. Prices couldn’t drop much below the $40pb mark, since most oil-producing nations (and especially those in OPEC) needed a higher oil price to sustain revenue stability, and so would agree production cuts to ensure that. But on the higher end, the thought was that upside was limited, because the new technology used by shale producers in the US meant oil supply could very quickly be expanded to capitalise on higher prices.


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