Taiwan as a warning
The Asian country’s weak export activity does not bode well for the development of global profits.
Source: UniCredit
Even if the United States has so far managed to escape this trend, there are various signs pointing to a further slowdown in the global economy. The negative development of export activity in Taiwan, for example, makes one pessimistic. In the past, this has been a leading indicator of global earnings development – especially because Taiwan, as an important semiconductor producer, plays a central role as an early cycle supplier.
This is highlighted by the chart above from UniCredit, which compares Taiwan’s year-on-year export growth (red line) with the change in corporate profits in the MSCI All Country World Index (black line). The red line was moved forward by six months.
If the indicator is correct this time, global corporate profits are likely to contract over the coming months, which will also affect the development of stock markets.
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