In a new report, Cornerstone Macro analyst Francois Trahan discusses the firm’s 10 most requested charts among Cornerstone clients. After looking at the updated charts, Cornerstone remains bullish on the market, despite the recent plunge in investor sentiment. Here’s what they see in the charts.
1. Percentage Of Countries With A PMI < 50
The first chart shows the number of countries with a Purchasing Managers Index (PMI) under 50. Countries with a PMI over 50 have expanding manufacturing sectors, while a PMI under 50 indicates contraction.
2. NTM P/E Vs. Market Return
This chart of forward P/E ratios versus market returns surprises many Cornerstone clients. The years that the market produces the highest returns are years that the market books moderate earnings growth and strong multiple expansion. In the years with the strongest earnings growth, multiples often compress and the market returns are subpar.
3. S&P 500 EPS Vs. P/E Breakdown
Gains earlier in 2015 were driven by multiple expansion, but recent gains have been driven more by earnings growth, which boosts investor confidence.
4. Early Cyclicals
Early cyclicals are…
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