A New Publication. As a complement to our Regional and Sector Strategy: Monthly Update we introduce a new publication that will examine in detail the outlook for global earnings on a regular basis.
A Positive Outlook for 2016 Earnings. While the current consensus expectation is for double-digit gains in MSCI ACWI EPS in 2016, single-digit gains seem more plausible, driven by modest sales growth and some margin expansion.
A Conservative Scenario. After four years of flat EPS, comparisons are easy. A conservative scenario of no earnings growth in the Energy, Industrials and Material sectors and 5-10% growth in the other GICS would support 7% growth in MSCI ACWI EPS in 2016. In terms of regions, Japan seems likely to enjoy a fourth consecutive year of earnings gains in 2016.
Support for our Market Outlook. 5-10% 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)
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.