The Q1/18 reporting season is almost over with more than 90% of US and European companies having already reported their quarterly results. A strong earnings season was one of the main reasons why the equity markets started to rally strong from their trough towards the end of March recovering the losses suffered in the first quarter of the year.

US Companies reported strong results for the first quarter

US corporate earnings have increased steadily since the beginning of 2017 and have continued to do so beyond the US tax reform. The Q1/18 earnings figures positively surprised the consensus on both EPS and sales, helped by a weaker USD.

Europe too had a decent earnings season

Despite a stronger EUR/USD, eurozone corporate earnings continued to grow at a robust pace over the last 12 months. We are now seeing a reversal of the EUR/USD in Q218 which will be a tailwind for European companies.

So what happened this week to increase volatility in equity markets?

Autos under pressure

President Donald Trump’s administration has started an investigation into whether car and truck imports threaten national security, a move that could lead to new US tariffs on foreign vehicles.

An investigation would unfold under the same law the US invoked for global tariffs on imported steel and aluminum. An additional tariff on vehicles of up to 25 percent is also under consideration.

Turkey’s central bank raises interest rates

Turkey’s central bank raised interest rates at an emergency meeting on Wednesday and President Recep Tayyip Erdogan pledged allegiance to global principles on monetary policy, bowing to pressure from financial markets after plunging the nation into a currency crisis.

Oil falls due to Opec supply worries

The price of oil fell this week after an unexpected build in US crude and gasoline inventories despite strong demand, and as traders weighed a possible increase in Opec crude output to cover any shortfalls in supply from Iran and Venezuela.

Fed minutes

Federal Reserve officials gave no indication that they are likely to speed up their pace of interest rate increases during their most recent two-day meeting, suggesting instead that they would be willing to allow the inflation rate to rise slightly above 2% for a “temporary period,” while the economy continues to expand.


We continue to expect 2018 to end the year with positive gains for global equities with particular preference to European and Emerging Market equities.

However, it is also true that pullbacks and volatility will become more common as investors adjust to rising interest rates. More volatility should not detail the underlying economic expansion or fundamentally dent risk assets, but it will make markets bumpier and less predictable.

This article was issued by Kristian Camenzuli, investment manager at Calamatta Cuschieri. For more information visit, The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.

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