Executive Summary

Maintaining an Outlook for Modest Gains in 2016. Building on the recent analysis in our Regional and Sector Strategy: Monthly Update, we continue to embrace an outlook for just a single-digit increase in profits in 2016, which is in contrast to consensus estimates that imply a 21% gain in earnings.

A Conservative Earnings Scenario. An assumption of no earnings growth in the Energy, Materials and Industrials sectors and 5-10% growth in the other GICS would support single-digit growth in MSCI ACWI EPS in 2016. In either the consensus or conservative scenario, Information Technology and Consumer Discretionary — two of our Overweight sectors — would experience relatively fast earnings gains.

Japan Still the Standout. Unique in our regional model, Japan — an Overweight — is on track to experience its fourth consecutive year of earnings growth.

Support for our Market Outlook. Single-digit earnings growth combined with stable P/Es would suggest modest gains in global equities in 2016.

Figure 1:   A Conservative Scenario for 2016 MSCI ACWI EPS
Percentage and Absolute Change in Earnings in $ Millions
(Sum of Blue Bars Equals Black Bar)

Geraghty GES March figure1

 

Source: MSCI, Cornerstone Capital Group

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Michael Geraghty is the Global Markets Strategist for Cornerstone Capital Group. He has over three decades of experience in the financial services industry including working as an investment strategist at UBS and Citi.