Chart of the week: much ado about nothing?

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Obviously not, as global equities have had an unsettling April after material declines in March. There were double digit intra-month declines after the US administration’s initial ‘Liberation Day’ trade/tariff announcements on April 2nd. However, as markets tested policy makers, policy makers have retreated from extreme positions and equity markets have recovered despite continuing uncertainty. As we stand now, global equity markets are down about 1% in April in local currency terms, albeit about 7% below recent highs. Returns to euro investors have been dragged down by a further 4% in April and 7% from highs due to currency moves.

Since US policy changes started to be announced, economic growth forecasts have been revised lower. A US/global slowdown, with a one or two quarter growth pause followed by a rebound towards trend now seems to be the central scenario. So far in April, global EPS growth forecasts have been cut by 2%, to 9% growth in 2025. European EPS growth forecasts have been cut the most, ~5% while US EPS growth cuts have been ~1.7%. The energy and auto industries have seen the biggest cuts. Of course, forecasts will change, including as we progress through Q1 earnings season which has been relatively strong so far. Will equity markets look cheap at the trough? In recent history, equity markets typically bottom out before earnings forecasts do as investors have looked through the valley of short-term earnings pullbacks.