Running in Place
Given all the news that has recently driven markets up and down, how is it that five months into 2018 we find ourselves essentially right back where we started? The answer is largely a tale of two metrics — earnings and valuation. While earnings per share have, if anything, exceeded expectations so far, rising interest rates and trade tensions have caused price-to-earnings ratios to trend in the near opposite direction. Our view is that earnings will eventually carry the year, but the tug of war is likely to continue.