Research Signals - July 2018

Trade tensions between the world's two largest economies have weighed on sentiment across global equity markets for several months and continue to drive markets, as valuation and securities lending indicators were strong performing signals across most of our coverage universes, while price momentum lagged (Table 1). In the meantime, investors hope for positive trade negotiations and carefully watch for the impact on relatively strong earnings and PMI data across US and European markets, as global manufacturing slowed again in July, with the J.P. Morgan Global Manufacturing PMI™ posting its lowest reading for one year.

• US: Investors shied away from high risk names measured by 24-Month Value at Risk, while small caps underperformed, particularly the microcaps, as confirmed by Natural Logarithm of Market Capitalization
• Developed Europe: Small caps also underperformed in European markets, along with overvalued names captured by Industry Relative Leading 4-QTRs EPS to Price
• Developed Pacific: Book-to-Market was a highly rewarded indicator, especially in Japan which experienced a 15.9 percentage point swing in spread performance since May
• Emerging markets: TTM EBITDA-to-Enterprise Value and Demand Supply Ratio were positive signals, while Rational Decay Alpha spread performance was negative

Table 1

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.