Follow Your Impulse
China Credit Impulse and EM vs. US Earnings Growth
Source: Bloomberg, MSCI, S&P and Todd Asset Management. Data as of 1/31/2019.
Credit Impulse measures the 12mo percent change in social financing as a percent of nominal GDP. This series is then led by 9 months.
Credit impulse measures new credit issued as a percentage of GDP, a variation of liquidity in the Chinese economy.
After several years of contracting credit growth led by a deleveraging campaign in China, we are seeing a shift emerge as stimulative measures are implemented.
Importantly, trends in China's credit impulse tend to lead Emerging Market earnings growth. If history is a guide, this suggests that we should see activity recover in the second half of 2019.
While we continue to think that a US/China trade agreement in the coming months will support international stocks and earnings in general (and Emerging Markets in particular), a return to expansionary credit impulse further strengthens our conviction in a continued recovery as the year progresses.
This publication has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance does not provide any guarantee of future performance, and one should not rely on performance as an indication of future performance. Commentary may contain subjective judgements and assumptions subject to change without notice. There can be no assurance that developments will transpire as forecast. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of Todd Asset Management LLC. © 2019
MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. With 1,125 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. S&P® 500 Index is a widely recognized index of market activity based on the aggregate performance of a selected portfolio of publicly traded common US stocks.
The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an "as is" basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the "MSCI Parties") expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com).