Eye on the Market | March 15, 2012 J.P Morgan Topics: Is US data as good as it looks? Is Chinese data as bad as it looks? Is European data as bizarre as it looks? There’s also some good news on the global profit outlook, or at least an end to the bad news. A measure of global earnings revisions had been running negative for 40 weeks in a row until last week when it turned slightly positive. Other corroborating evidence comes from conversations we’ve had with private equity firms, whose portfolio companies are generally planning for 10%-20% increases in capital spending budgets this year. Global earnings revisions vs. global equities Unfortunately, the ECB can't create jobs (# of upgrades minus# of downgrades)/ total revisions Level Employment, percent change, QoQ, saar 0.4 1,575 3% Oe 1,475 2% Germany 04 1,375 0.0 m\, VN AN aft 1275 1% ~~ jo win | 0% -0.2 1,075 “0.3 MSCI World 975 -1% Euro Area “et Index 875 -0.5 _ -2% -0.6 175 -0.7 675 -3% 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 Source: Citigroup, Bloomberg. Source: Eurostat, Bundesbank. After four years that challenge some of the basic assumptions of efficient markets and laissez-faire capitalism, there is a pent-up demand for normalcy among individual investors, money managers, CEOs, corporate treasurers, pension funds, regulators, etc. Through massive money creation, Central Banks have provided the veneer of normalcy which has allowed the private sector to get moving again in the US, or at least in the case of Europe, to stop declining. Markets love it. Is the ECB’s Mario Draghi a genius? Only time will tell. The last time the term Maestro got thrown around, it was a case of premature exaltation. The latest from Europe: my head is hot and my feet are freezing Angela Merkel described Europe as being ‘“‘a good way up the mountain path” regarding the debt crisis. Courtesy of the ECB, there has been a dramatic improvement in sovereign and bank debt markets. However, in the real economy, improv