The Weekly Strategy Report - J.P. Morgan Asset Management

The Weekly Strategy Report

Contributor Multi-Asset Solutions
In brief
  • As a greater share of corporate profits is generated from non-domestic sources, the performance of an equity market, relative to the global benchmark, can be dominated by movements in the country’s currency. The euro has strengthened since mid-April and the typically negative correlation between euro area equity’s relative performance and the euro has reasserted itself.
  • While currency strength can act as a drag on corporate profits, the crucial driver of stronger economic growth provides an important offset. In recent weeks a slump in the earnings revisions ratio has vexed investors because the ratio can give an immediate read on the potential for a change in the more important, but slower moving EPS level. So far 2018 EPS estimates have been largely unchanged.
  • Our overweight to euro area equities is accompanied by a preference for Japan and emerging market equities. All three should benefit from the backdrop of stable global growth, but they each provide essential diversification in terms of currency exposure.

Source: Thomson Datastream; data through August 16, 2017. For illustrative purposes only.

The Weekly Strategy Report (21 August 2017)

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Please be aware that this material is for information purposes only. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. JPMorgan Asset Management Marketing Limited accepts no legal responsibility or liability for any matter or opinion expressed in this material.

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