An expert believes that companies see the relatively strong performance this year despite the threat of a slowing global economy. Ken Wong, Asia equity portfolio specialist at asset management firm Eastspring Investments, said that guidance from companies on their expected earnings for this year has been "pretty good".
On an interview with CNBC's "Street Signs" on Tuesday, Wong said that despite all this talk (about the) trade war slowing down economic growth, companies are still seeing a fairly decent amount of earnings growth expectations for 2019.
The growing concern of a recession heightened in recent weeks as the March data showed visible signs of a potential downturn. According to analysts, the yields on long-term United States debts turned lower than those of short term debts. It is believed that the yield curve inversion is known as one of the most reliable indicators of a recession in the market.
The weakening economic data also sparked fears as manufacturing activity in the Eurozone fell to its lowest in more than six years in March. The United States Federal Reserve recently projected that there will be no further interest hikes in 2019. The Feds also justified its more temperate outlook by limiting the growth outlook of the United States this year.
According to Wong, all the factors scared a lot of people, but then, they started talking to companies and, when they reported their number, they said that 2019 is looking to be pretty solid and things are picking up. He added that such companies are still expecting double-digit growth in markets like China, Hong Kong, and India.
Wong also emphasized that a decision from the central bank to hike would be an opportunity for investors to capitalize on any stock market correction. He also said that if markets do correct, that's a perfect opportunity to initiate gradually accumulating shares as well because they still have a bit of a short-term impact on share prices. He also added that If companies do see their share prices correct 5%, 10%, why not double down and actually increase share exposure on some of the fundamentally sound companies. Other, however, analysts contradict the forecast of Wong.
Morgan Stanley warned that there will be a full-blown earnings recession in American companies. Its chief United States equity strategist, Michael Wilson, said that he's looking for two or more quarters of negative or flat growth, meeting the technical definition of a recession.
