Early Cycle Indicator – Earnings boom ahead

(13.10.20)

In these three short videos, Capital Goods analyst Dan Cunliffe outlines his latest Early Cycle Indicator research. US inventories have now corrected 20%. This has happened 15x since 1970, followed by a >50% sector rally and is a major buy signal. Our ECI indicates >11% sales growth from 1Q21 vs 6-8% consensus and points to the strongest earnings boom since 2009, as our short cycle data is troughing at the same time as longer cycle capex. This historically underpins a return of inflation (PPI). Thus, we now expect material upgrade risks ahead, especially for value names. German data, driven by auto, posted its second consecutive record high order/inventory ratio in the data's history. European data could hit new highs as other economies catch-up. Click below to watch the videos. Click here to read the research.

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