Decent Q3 figures should not influence analyst forecasts

Beware of strategists wielding rulers. Decent third quarter GDP numbers have sent analysts scurrying off to increase their forecasts. We see this all too often, forecasts derived from extrapolating the newest trend, ratcheted up or down according to the latest surprise without regard to the deeper fundamentals that will really drive the eventual outcomes. Here lie elephant traps for asset allocators.

The macro economic backdrop has improved, with encouraging pick ups in GDP in the likes of the US, Germany etc, if sadly not the UK. But this was always going to happen in the initial recovery stage; further out the many headwinds remain just as strong as ever and it is disingenuous to assume that because we have seen a bit of a bounce, the whole story changes. Equity markets have risen dramatically - in terms both of speed and distance - since the dog days of last March when, let's remember, only a handful of battered contrarians had a good word to say for them. The bull market has been...