Are we headed for a global earnings recession? Overlaying the year-over-year percentage change in Singapore Electronics Exports with earnings per share growth for the MSCI World Index, a widely used proxy for world stocks, suggests we may very well be. Exports of electronic goods from Singapore dropped 25.9% in August, largely as a result of Trade War related issues. The MSCI World Index represents approximately 85% of all large and mid-cap developed-market public stocks, adjusted for float and other investability requirements. The high correlation of the two series (0.48 without any lead and 0.67 if we use Singapore Electronics Exports with a 6-month lead) is a result of Singapore's key role in global supply chains and points to trouble ahead for corporate profits.
The chart below can be downloaded here.
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