•The diminishing rate of decline in economic activity sufficed to create a bottom in the S&P 500 around March 2009.
• This time, the market is even further ahead of economic data. We illustrate this by examining our nowcasting model with weekly data. In our estimates, the market is discounting a trough in economic activity already around mid-Q2.
• The implication is that markets are unlikely to entirely “see through” economic reports until Q3. Much has to go well going forward to justify any further advance in equities. The downside risks, on the other hand, remain intact.
• Comparing regions, the resilience of US corporate profits does justify the outperformance of the US market vs. both Europe, Japan and emerging markets. We see no reason for a change in this picture and a relative O/W of US equities continues to look justified.