For Sectors, It’s All Up to Earnings — Earnings fundamentals for the majority of MSCI GICS have continued to deteriorate.  Global equities may be unlikely to find a bottom until earnings expectations stabilize.

For Regions, Governance is a Key Factor — Governance in many Emerging Markets has, for some time, been much weaker than in Developed Markets, and has likely only gotten weaker lately.

Strategy Largely Unchanged — Our proprietary “Investment Clock” is still suggesting that the biggest gains for equity markets in the current cycle may be behind us.  Some small tweaks to strategy recommendations.  U.K. upgraded to Neutral from Underweight based on a stabilizing earnings outlook.  Russia downgraded to Underweight from Neutral based on deteriorating earnings outlook, worsening valuations.

Maintain a Defensive Stance — We are underweight Energy, Materials, Industrials.  In terms of regions, we are underweight Latin America, India, Russia, China.

Sept monthly figure

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