So Go Earnings, So Go Stock Prices – December 23, 2019

We continue to recommend that equity investors overweight the U.S. in a global equity portfolio on a 6-12 month horizon. A report from MRB last week examined the outlook for global corporate profits and concluded that relative earnings tailwinds in key sectors such as technology (strong) and financials (lackluster) continued to favor the U.S. equity market (in relative terms).

While global growth momentum will improve in 2020, which usually favors non-U.S. bourses in relative terms, subdued capital spending and trade will temper corporate earnings beta for major non-U.S. markets. A lack of prospective earnings firepower thus warrants maintaining underweight exposure to the normally pro-cyclical euro area, Japanese and commodity-dependent markets, in favor of the U.S.

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