When it comes to equities, it’s (mostly) all about earnings, earnings, earnings.
For several markets, little has changed in terms of analyst expectations for earnings per share (EPS) in 2025.
EPS estimates have been rising appreciably and steadily for companies in the tech-heavy NASDAQ 100 index throughout 2024, with a significant contribution to these expectations from the so-called ‘Magnificent 7’ stocks.
Even excluding those blockbusters, the earnings outlook is good. Before November’s US election, expectations for US small-cap stocks (ref Russell 2000 in graph below) had been rising at a reasonably good pace. After the victory of Donald Trump and the Republican party, they moved sharply higher.
For value stocks, by contrast, the expectations are flat overall, with higher EPS forecasts for financial stocks offsetting lower numbers for energy.
Outside the US, the existing negative trend for emerging markets and Europe persists. Given the market worries over higher import tariffs from the Trump administration, one would not expect the outlook to improve much in the near term.
A broadly weaker yen has helped maintain the positive pattern for Japanese equities, though weak demand in China may limit the upside for Japanese corporate profits.
Disclaimer
Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
