Multi-Asset Solutions Weekly Strategy Report
- The current U.S. earnings growth downcycle has been largely consistent with the recent deterioration in macroeconomic momentum.
- Realizing today’s earnings growth expectations would require economic outcomes that we see as upside risks rather than a reasonable base case. And 2020 EPS growth rates are high despite the fact that the level of profits is being steadily revised lower.
- Our below-consensus outlook anticipates 2020 earnings growth in the low-to-mid single digits, which is far from disastrous, but not enough to drive large equity market gains without further substantial valuation expansion.
- We reaffirm our moderate underweight stance on equities. Across equity regions we continue to favor more defensive markets such as the U.S. and Canada, and remain underweight more cyclically geared markets such as Europe and emerging markets.
EXHIBIT 1: SOFT MACRO DATA POINTS TO THE POTENTIAL FOR U.S. EPS DISAPPOINTMENT
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The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future.