{"id":55055,"date":"2016-08-08T00:42:32","date_gmt":"2016-08-07T22:42:32","guid":{"rendered":"http:\/\/beta.next-finance.net\/opinion\/wanted-earnings-growth\/"},"modified":"2019-12-31T01:01:13","modified_gmt":"2019-12-31T00:01:13","slug":"wanted-earnings-growth","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/opinion\/wanted-earnings-growth\/","title":{"rendered":"Wanted: earnings growth"},"content":{"rendered":"<p>Global stocks are up year-to-date, having shaken off worries about the<br \/>\nstrength of the global economy in the wake of the UK\u2019s Brexit vote. But we<br \/>\nbelieve further gains require a meaningful improvement in corporate<br \/>\nearnings, particularly in developed markets.<\/p>\n<p><a href=\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016.jpg\"><img loading=\"lazy\" class=\" aligncenter size-full wp-image-55053\" src=\"IMG\/jpg\/equity_returns_by_source_2016.jpg\" alt=\"equity_returns_by_source_2016.jpg\" align=\"center\" width=\"613\" height=\"545\" \/><\/a><\/p>\n<p>Equity markets are running on fumes. The chart above shows how multiple<br \/>\nexpansion \u2014 or rising price-to-earnings ratios \u2014 has been the main driver of<br \/>\nreturns in many markets this year. Earnings growth has been flat to negative.<\/p>\n<p><strong>The main ingredient required for further gains<\/strong><\/p>\n<p>The worst of the U.S. profits recession appears to be over. Second-quarter earnings growth for the S&#038;P 500 likely will still show<br \/>\ncontraction from last year\u2019s levels. Yet we find reasons to be marginally more optimistic about the second half. Sales growth has<br \/>\nbeen better than expected, and is on track to turn positive for the first time since the fourth quarter of 2014. We also see the<br \/>\nenergy sector\u2019s drag on earnings fading by year-end. The problem? High U.S. valuations and strong flows into U.S. equities<br \/>\nalready appear to reflect part of the good news. A U.S. market overweight has become a consensus trade, our analysis shows,<br \/>\nraising the risk of sudden reversals.<\/p>\n<p>In Europe, analysts have slashed their expectations for 2016 earnings growth since the beginning of the year on a collapse in<br \/>\nexpectations for the banking sector. Earnings are set to contract in seven out of 10 European sectors in the second quarter. The<br \/>\nbright spot: global multinationals with geographically diverse sales, in sectors such as health care, materials and technology. In<br \/>\nJapan, many companies are budgeting for a weaker yen in the second half, surveys show. This increases the risk of downward<br \/>\nearnings revisions if the yen stays strong and hurts the overseas earnings of Japanese companies.<\/p>\n<p>The main takeaway for investors: Be selective. We prefer quality companies that can increase earnings in a low-growth<br \/>\nenvironment or grow their dividends. U.S. stocks with high dividend payouts, by contrast, look expensive and offer limited<br \/>\nearnings potential at this time, we believe.<div id='gallery-1' class='gallery galleryid-55055 gallery-columns-3 gallery-size-herald-lay-c1'><figure class='gallery-item'>\n\t\t\t<div class='gallery-icon landscape'>\n\t\t\t\t<a class=\"herald-popup\" href='http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016.jpg'><img width=\"470\" height=\"313\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016-470x313.jpg\" class=\"attachment-herald-lay-c1 size-herald-lay-c1\" alt=\"\" loading=\"lazy\" srcset=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016-470x313.jpg 470w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016-300x200.jpg 300w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016-414x276.jpg 414w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016-130x86.jpg 130w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/08\/equity_returns_by_source_2016-187x124.jpg 187w\" sizes=\"(max-width: 470px) 100vw, 470px\" \/><\/a>\n\t\t\t<\/div><\/figure>\n\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Global stocks are up year-to-date, having shaken off worries about the<br \/>\nstrength of the global economy in the wake of the UK\u2019s Brexit vote. But we<br \/>\nbelieve further gains require a meaningful improvement in corporate<br \/>\nearnings, particularly in developed markets.<\/p>\n","protected":false},"author":1,"featured_media":55053,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1663,1809,1655,2073,1943,1651,1437,2087,1776,2068],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/55055"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=55055"}],"version-history":[{"count":1,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/55055\/revisions"}],"predecessor-version":[{"id":55056,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/55055\/revisions\/55056"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/55053"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=55055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=55055"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=55055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}