The Weekly Brief
Global Market Insights Strategy Team
Following a torrid fourth quarter of last year, equity markets have bounced back strongly across the globe so far in 2019.
Yet despite strong headline returns, corporate earnings are coming under pressure. Earnings growth has made only a modest positive contribution to returns in the US and the UK, while acting as an outright drag in Japan, Europe and Emerging markets. Instead, expanding stock market valuations have been responsible for the majority of equity returns. Analysts are still expecting a lofty 10% growth rate for global corporate earnings in 2020 despite strengthening macro headwinds. With valuations in many markets already reflective of heightened expectations for further central bank easing, downward revisions to earnings expectations could pose a risk to equity market returns in the months ahead.
Rising valuations have driven equity returns this year
%, sources of equity market returns in 2019 year to date