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The problem for stocks: fewer positive surprises

Radachynskyi Serhii / Shutterstock
Radachynskyi Serhii / Shutterstock

By virtually every metric, the U.S. and most of the major economies are accelerating for the first time in many years-and in a coordinated fashion. A further bit of good news: Unlike last year, U.S. economic expectations are improving faster than the rest of the world. During the past six months, 2018 growth expectations have risen from 2.3% to 2.7%, significantly above the post-crisis average. However, while both hard data and expectations are improving, in recent months the latter, expectations, seem to be improving faster than the former, hard data. In other words, economic releases are no longer beating expectations as frequently or by the same magnitude as was the case in the fall. As "beats" have slowed, economic surprise indexes have weakened. The U.S. Citi Economic Surprise Index has been slipping of late. The trend is even more evident at the global level. The Citi Major Economies (G-10) Economic Surprise Index has given up more than half the fall's gains and is on the cusp of turning negative, i.e. more negative than positive surprises, for the first time since early last fall (see the accompanying chart).

Why does any of this matter?

Russ premium for stocks

When good is not good enough

earnings will doubtless rise Russ Koesterich , CFA, is Portfolio Manager for BlackRock's Global Allocation team and is a regular contributor to The Blog .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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