Premature to conclude that the worst is over for equity markets

EQUITY markets have undergone a rocky first quarter, first coming under pressure for most of January and February because of a collapse in oil prices and worries over a possible hard landing in China, before recovering all their losses in March when oil rebounded and central banks intervened.

However, even though oil appears to have stabilised, the US Federal Reserve has delayed raising interest rates and China's authorities have introduced more stimulus in the form of reserve ratio cuts, it would be unwise to think that the worst is over.

One reason is weak earnings - all over the world, corporate profits have taken a hit, with some describing the situation as an "earnings recession''. In the US, for instance, the fourth quarter of 2015 was the third straight quarter in which S&P 500 companies' profits fell versus the year prior, the first time this has happened since 2009.