It shouldn’t be a big surprise, but our data shows US corporate management teams are sensitive to global growth. In the chart below, we compare the US equity market’s guidance spread to Markit’s Global Manufacturing PMI. The guidance spread measures the percentage of companies raising guidance each month to the percentage of companies lowering guidance each month. Higher readings indicate more guidance raises relative to lowers, and therefore optimism from management teams about the outlook. We’ve taken the raw monthly percentage, seasonally adjusted it, and taken a 3 month average to compare to ISM. As shown, big upswings or downswings in guidance tend to coincide with similar swings in global manufacturing activity as measured by Markit’s PMI. Currently, we’re in the midst of a swing lower for both, but things are still actually more positive than numerous periods from 2012-2016.
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