In our judgment, the weight of evidence continues to back a pro-cyclical investment positioning despite the persistent headline fears. The chart below shows the trend in economic surprises (actual reading versus prior expectations) in the three most important economic regions. Economic surprises have been in a downtrend since April – that is expectations proved too optimistic against a backdrop of rising political tension, further covid outbreaks, supply chain disruptions, etc. However, also of note is that all three regions have seen an uplift since early October, lead by the U.S. We suspect that as positive trend persists, analysts will need to start upgrading their 2022 earnings estimates.
Source: Strategas Research Partners