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The Weekly Brief

Contributor Global Markets Insights Strategy Team

US Business sentiment, as measured by the ISM manufacturing survey, continues to march upwards. September’s headline reading of 60.8 is the highest since 2004.

Hurricanes Harvey and Irma distorted the deliveries subcomponent of the survey but the strength in the new orders and employment components are particularly encouraging, with both above 60 (a reading above 50 indicates expansion). In previous business cycles the ISM index has been a good lead indicator for S&P 500 earnings per share (EPS) growth. Therefore, the improvement in manufacturing business sentiment should provide a supportive backdrop for US earnings and equities over the coming months.

ISM survey shows US business optimism is high

Index level (LHS); % change year on year (RHS)

Source: ISM, Standard & Poor's, Thomson Reuters Datastream, J.P. Morgan Asset Management. EPS is earnings per share. Data as of 30 September 2017.

The Weekly Brief (16 October 2017)

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