• Our global equity strategists acknowledge that the latest health scare could potentially lead to more
near-term de-risking, but they note that past pandemics episodes didn’t lead to sustained selling, they
tended to ultimately be buying opportunities. Looking at earnings, they argue that current projections
for the next two reporting seasons are too low, outright below what was already delivered in Q2 and Q3 of
last year, which is historically very unusual. As a result, they expect positive earnings surprises. They
highlight that the market reaction to such positive earnings surprises has been strong in previous
quarters. They disagree with the widespread view that EPS downgrades to the full year numbers might limit
further gains for stocks. Double-digit projections 12-24 months out by IBES are the norm. If one was to
worry about elevated EPS growth projections by consensus of sell side analysts, then one would end up
never buying stocks. Finally, the deceleration in PMI momentum which was pressuring earnings growth over
the past 18 months is likely to inflect higher. Topline is likely to benefit from a potential peaking in
the USD and the consequent bounce in commodity prices. Crucially, corporate guidance is likely to be
somewhat stronger going forward, due to better macro data, as well as trade ceasefire.
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