The first is obvious to my table, S & P 500 significantly upgraded a FTSE 100 Britain America index. The second is that, considering what a March sad we have just endured, both indices held surprisingly well.
To address the growing gap of the first performance, it is an indication to me of how investors are beginning to see the different ways in which the Governments of both sides of the pond choose to care for their in fact rather similar economic challenges.
United States, President Obama decided to launch the can on the road, leaving the solution to horrible deficit until after the presidential election next year. Instead, he focused his power of fire on the promotion of the growth of the US economy with monetary policy of zero interest rates and a net of relaxation on the tax front.
Here, George Osborne chose to fix the deficit first and hope that austerity will create growth conditions. Dark comments, between the others, Dixons, John Lewis, Sainsbury's and then in the last week suggest that the success of this economic experiment is far from guaranteed.
In the months following, with approximately two-thirds 500 companies including benchmark of U.S. report their first quarter results, we will have the chance to see if the relative United States out-performance is justified. We will also be able to judge if his absolute gain (up on 16pc since the end of September) can be maintained.
There are many reasons to believe that investors may be too optimistic, and which should not be surprising person who saw the events taking place in the Japan, Libya and Ireland. If someone had provided toxic cocktail of March of the earthquake, tsunami, war, nuclear and endless crisis financial turmoil that they would probably not also predicted shares to a three-year high.
Top of the list of things to worry about is the fact that the price of oil has increased more by 40pc year last with 30pc metals prices increase and an increase to 40pc in the cost of food.
Is a major concern for investors sitting on two years of gains, according to Citigroup, five six significant economic hardship global corporate profits took place shortly after a rise of 50pc or in the price of oil more. Otherwise, it immediately, it seems that we could be close to the point in which company profits get corrupted by the rising costs of entry.
Coincidence is not the same as causation, however. One of the reasons why oil prices have tended to precede the fall of earnings is that they are the reflection of an overheating of the world economy and tighter policy, that which puts the brakes on the profits of the business.
But what happens if the oil price spike does not reflect excessive but, at least in part, the result of political uncertainty and fears of a supply shock? In this case those who seek to understand the future path of corporate income tax could be better to look at some other fires red tend to begin to blink before profits South.
In virtually all the folds of revenue since 1970 has been applied by all the following: companies were generating unusually high profits assessed against the capital, they are employing in their businesses; the unemployment rate fell to levels where labour shortages are threatening a price spiral / salaries; interest rates are higher that the obligations of the Government to more long term that governments worry overheating; interest rates are well above the inflation rate. and profit forecasts are on the slide.
Today, none of these five conditions, which suggests that the earnings season to appear in the largest economy in the world, then that it is slower than the recent quarters, will always healthy positive.
The number of companies that produce positive surprises on the day of the results fell in each of the four quarters of video, but it remained for more than 350 to 500 in the last three months of the year. The expectation is always that earnings will be higher 12pc this quarter. With shares traded on a multiple historically low for these always increasing earnings per share, upheavals in March investors optimistic response seems rational.
Tom Stevenson is a Director of Fidelity International investment. The views expressed are his own. www.Twitter.com/tomstevenson63
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