Pick-up in global growth still likely

A current theme of analysts' conversations is the apparently contradictory message that the recent rally in both equities and government bonds appears to be giving. In May the MSCI US index rose 5.3%, while the 10 year Treasury yield fell 49 basis points to a near 40 year low of 3.4%. These numbers suggest that currently optimistic US earnings growth forecasts are not at risk, despite the current era of very weak pricing power, while the bond market indicates little or no domestic or global growth and the risk of deflation. With positive returns on both bond and stock markets in most m...