As the global markets slow down, analyst’s 2019 earnings projections may be drastically over-inflated says James Bevan, chief investment officer at London-based CCLA Investment Management, which provides investment services to the Church of England. He predicts that international markets will see stifled growth for at least another year to come, and perhaps even longer.
The recent decision by the US Federal Reserve to halt plans for rate hikes suggests that the Fed has waning confidence in the strength of the global economy, especially at the prospect of rising interest rates.
Current corporate earnings projections, with growth as high as 35%, come as a surprise to Bevan.
In an interview with Bloomberg, Bevan predicts far more conservative estimates: 5-4% growth for this year and next.
“I don’t know how the ‘street’ can have double digits when everybody knows that the world is slowing.”
Bevan also questions just how long the Federal Reserve can keep interest rates artificially low beyond their projected reversal date. Not only does the Fed run the risk of weakening the dollar by holding current rates, but at some point it needs to raise borrowing costs simply to finance its own operations.
“The Fed is definitely going to be calling for cash in April and May.”
According to Bevan, although the Fed’s cautious approach is a wise strategy, the current shift in policy may not be enough to turn the economic tides, at least in the short term.
“I think the markets are going to worry that the Fed is doing too little too late.”