« Global earnings look set to deliver double digit growth this year, at 12%, the best since 2010. The strength was broad based, with all the key regions contributing, and largely driven by Cyclicals and commodities. As base effects are turning less favorable, the question is whether earnings will remain a support for equities into 2018. »
This is the opening statement and a rather bullish intro to a report published today by JPMorgan’s strategists Mislav Matejka, Emmanuel Cau, Prabhav Bhadani and Aditi Balachandar.
World GDP growth will remain robust next year, the level of profit margin should be improving, especially in Europe where it currently is « undemanding », FX impact should be tamed and consensus is not overly bullish, despite the current « Goldilock environment » of better growth and soft inflation (for now).
What about the fundamentals ?
Some interesting numbers/facts about world/US/Europe equity markets this year:
MSCI World EPS Growth expected at +12.3% in 2017 (vs +2.3% in 2016 and -3.2% in 2015).
EPS strongest in EM (+22.4%), followed by Japan (+20.9%), UK (+20.7%), while US and Eurozone lag (+10.4% and +9.8% respectively).
World EPS should grow by 9.7% next year and 9.4% in 2019 according to consensus number, with the emerging markets and the US in the driving seat (+12.7% and +11.8% respectively) while Eurozone EPS stand at +9.5%, UK at +6.4% and Japan at +4.7%.
In Eurozone, contribution to EPS growth should be more balanced next year than in 2017, with Cyclicals +9.5% and defensives at +8.6%.
Financials, Telecoms and Industrials should lead the way with EPS growth around 11%-12%, but no sector should bear negative EPS change next year.