Elliott said: “A fresh fear is lurking on global financial markets – and it is not about trade wars. It is that global GDP growth may have peaked in the current growth spurt that began in early 2016.”
Three reasons to be nervous
Elliott said the global GDP growth adds to three existing worries.
“One, the ongoing fear that a trade war will break out between the US and other major economies. Although the trade dispute with China has eased a little in recent days, largely due to Xi Jinping, the Chinese president, making a conciliatory speech last week.
“Two, apprehension that a new wave of regulation will impact on the business models of some of America’s largest quoted companies, such as Facebook, Google and Amazon.
“And three, growing tensions between the US, the UK and France with Russia, and others, following Friday night’s attack on Syrian installations.”
He believes that, despite these concerns, the “fundamentals remain supportive for stocks”.
“Consensus estimates for global corporate earnings growth in the first quarter are at 15% over the previous year, while for the S&P 500 index it is 17%.
“The beleaguered US tech sector is expected to see 22% earnings growth, which will help soothe investors’ nerves.
“Despite the prospect for two, maybe three, more rate hikes from the Federal Reserve this year, and probably one from the Bank of England in May, monetary policy remains loose by historic standards in all the main economies,” Elliott said.
“This supports risk assets, by keeping borrowing costs low for companies and their customers, and by keeping ‘risk free’ rates low and unattractive relative to the expected returns from stocks.”