Chart of the Week: US ESI Suggests Recent Equity Correction was Just a Blip

Despite the recent correction in US equities, Fathom do not think that 2018 will be the year in which the US equity market bubble bursts. One of the reasons we hold this view is that global growth looks set to remain strong, and businesses and consumers are in very good spirits. These points are reflected by Fathom’s Economic Sentiment Indicators (ESIs).

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The US ESI, updated last week, showed that economic sentiment increased last month, climbing from 5.5% in December to 6.1% in January. The ESI is not intended to be an accurate predictor of current quarter GDP growth, but it is a pretty reliable indicator of underlying economic activity. Accordingly, the rise in the ESI last month, from an already elevated level, suggests that the strong economic momentum continued into 2018, which should boost corporate earnings this year. US corporate earnings will also be boosted by the recent reduction in the corporate tax rate. Fathom’s ESIs are available on Datastream. For more information on their construction, contact Fathom Consulting.

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