These are the 2 things that will drive markets in the next three months
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The third quarter was dismal, with major US stock indices posting their worst quarter since 2011.
Now, the question is: What is going to drive performance through the rest of 2015?
Central banks policy is going to take a backseat, according to a global research alert published by Societe Generale on Monday.
"Market participants have started to question the effectiveness of monetary policy, with good reason."
"Although growth is expected to remain solid in developed economies, corporates are now facing external headwinds, against which central banks have limited tools."
Instead, there are two other key drivers of performance:
1. China
China has dominated investors' attention since its stock market rout in July and subsequent devaluation of the yuan sparked worldwide volatility.
Emerging markets and commodity-dependent economies have been heavily impacted by China's slowdown, though developed countries have been "left relatively unscathed so far" due to strong domestic spending.
Societe Generale said: "China should continue to weigh on global growth into 2016. But, we expect Chinese activity to stabilize somewhat near term, mostly due to a greater focus on infrastructure investment.
"Any sign of growth stabilization in China could alleviate fears of a global recession: watch China's leading indicators closely in Q4.
2. US earnings growth has been weak
Societe Generale said: "US earnings per share growth has been very disappointing this year, with Q3 earnings likely to decline year-over-year for the second quarter in a row... profits growth has never been this week outside of a recession."
The industrials, materials, and energy sectors have been weighed down by global factors including the strong US dollar, lower commodity prices, and slower global demand.
Those sectors which are exposed to US consumption could do well, in contrast, as consumers benefit from lower oil prices and a healthy job market.
Societe Generale
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