Companies warn on Q2 earnings outlook

Economic growth


Index Apr13.pngTraders in Western financial markets are confident of 3 key facts about the economic outlook:

• The US is already recovering, with auto and housing markets returning to pre-2008 levels
• The Eurozone crisis is almost resolved and recovery is expected by H2
• China’s new leadership will ensure its growth surprises on the upside

Thus, as this month’s Boom/Gloom Index shows, the S&P 500 has reached a new record level.

The problem is that we have been here before – in fact, twice before. The first was in March 2000, when the S&P hit a then record closing high of 1527: the second record was in September 2007 when it closed at 1565. On both occasions, investors’ confidence proved completely wrong as markets and the global economy then tumbled instead.

This might be 3rd time lucky, of course. But as the Wall Street Journal (WSJ) notes, companies are extremely cautious on the outlook. 86 have already issued negative guidance on earnings. This is also following an earlier pattern. In Q3 2007, the ratio of negative to positive guidance hit a record 2.38 ahead of the downturn. As Q1 2013 ended, the ratio set a new record of 3.58.

This caution is supported by new Bureau of Labor Statistics data, which shows US median household income has fallen 5.6% since June 2009 to $51,404. Instead, the benefit of the central banks’ liquidity programmes such as QE2/QE3 has gone to the top 10% of the population. The other 90% have seen their incomes fall. Yesterday’s unemployment data was also weak.

Meanwhile in Europe, the jobless rate hit a record high of 12% in February for the Eurozone, and was 10.9% for the European Union. 26 million were without work, and labour markets have now declined for 22 months. Equally China’s new leadership seems more concerned with bursting the property bubble than stimulating growth. New rules banning multiple home ownership for single people have just been announced in Beijing and Shanghai.

The traders comfort themselves they are climbing ‘a wall of worry’. But as the WSJ warns “Watch out. There may be a nasty drop on the other side of this wall“. Central banks have financed this rally, on the basis that rising stock markets will boost consumer confidence and lead to economic recovery. But they tried the same policy prior to both 2000 and 2007, and the results were awful.


China's PE import market declines


China’s polyethylene demand has proved an excellent forward indicator of e...

Learn more

US employment 'surprise' confirms computers lack commonsense


Last week saw more evidence that recent weakness in chemical markets mirrors dev...

Learn more
More posts
What’s next for Brexit and chemicals?

The UK is about to go to the polls again to try and decide the Brexit issue.  Chemicals will be one...

Global economy hits stall speed, whilst US S&P 500 sets new records

Whisper it not to your friends in financial markets, but the global economy is moving into recession...

Budgeting for paradigm shifts and a debt crisis

It is now 8 years since John Richardson and I published our 10-year forecast for 2021 in Boom, Gloom...

Paradigm shifts create Winners and Losers

MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK Next week, I will publish my annual Budget Outl...

Markets face major paradigm shifts as recession approaches

Major paradigm shifts are occurring in the global economy, as I describe in a new analysis for ICIS ...

No Deal Brexit still a likely option if opposition parties fail to support a new referendum

Canada’s normally pro-UK ‘Globe and Mail’ summed up the prevailing external view of Brexit las...

UK, EU27 and EEA businesses need to start planning for a No Deal Brexit on 31 October

New UK premier, Boris Johnson, said last week that the UK must leave the EU by 31 October, “do or ...

London house prices edge closer to a tumble

After the excitement of Wimbledon tennis and a cricket World Cup final, Londoners were back to their...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more