Key points

  • In 2019, we expect earnings growth to deliver close to 7-8% for global equities after the solid run in 2017-18
  • Valuation multiples are not a major headwind at this juncture although we see limited scope for re-rating
  • We continue to prefer the US over the Eurozone in our regional equity allocation

A year of no return

2018 has been a frustrating year for equity investors. Despite a fair economic backdrop and strong earnings growth in most parts of the world, the asset class still delivered a poor performance. At the time of writing, the total return for the global equity market stood at -1.3%, while the US was the only major market in positive territory, delivering 2.7%. Emerging markets (-6%) suffered from tighter global financing conditions, and concerns around trade protectionism – a backdrop which was exacerbated by heavy capital outflows. Euro area equities also disappointed (-6.4%) in the wake of lacklustre growth and ample political risk (Exhibit 1). On the style front, defensives (3.9%) outperformed cyclicals (-2.3%) while growth (1.5%) continues to beat value (-2.2%) – although giving up most of the gains from earlier this year (Exhibit 2).


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