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Equities Market Perspective: Earnings season - "as good as it gets"?

09/05/2018

  • Global equities made modest gains in April, as concerns over trade wars softened somewhat and the oil price rallied strongly
  • The UK was the best performing region over the month, a fall in sterling boosted earnings alongside M&A activity. Europe also saw positive returns, despite softer data, led by the energy sector
  • The US dollar strengthened amid the US 10-year Treasury yield touching the psychological 3% mark
  • Commodities led asset class performance, with Brent crude prices surging above $75. Energy was the best performing sector by a wide margin with consumer staples a notable laggard
  • Theme: Earnings season – It’s been an exceptional earnings season for Q1 reporting so far, with 80% of S&P500 companies topping forecasts
  • S&P500 earnings are expected to increase by almost 25% from Q1 2017, with the majority of sectors delivering double-digit growth
  • Despite record profits, price action has been muted on earnings announcements. Some have therefore begun to question whether we are at ‘peak earnings’ – is this “as good as it gets”?
  • As long-term investors, we believe that corporate profits are the main driver of stock market returns over the long haul. At this late stage of the cycle, stock selection becomes a more important

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Where past performance is referenced, please note that this is not a guide to future performance.

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