Executive Summary

Upgrade U.S. to Overweight from Neutral. Earnings estimate revisions turned sharply positive, adding to other favorable fundamentals including margins, share buybacks.

Information Technology: Still Neutral; Earnings Outlook Remains Unfavorable. We downgraded Information Technology to Neutral last month reflecting, in part, negative earnings estimate revision trends and a deceleration in expected earnings momentum. Both factors remain unfavorable.

Market Outlook Unchanged: Modest Gains in Global Equities in 2016. While the earnings outlook in the U.S. has improved, other countries are still seeing material earnings downgrades so that we continue to expect just a single-digit increase in global profits in 2016. Single-digit earnings growth combined with stable P/Es would suggest modest gains in global equities in 2016.

 

Figure 1:  Regional Over- and Underweights             Figure 2:  Sector Over- and Underweights
Arrows Indicate Change vs. Last Month

Geraghty June Monthly Fig 1 Geraghty June monthly fig 2

Source: 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.