Can equities bounce back in 2019?
- 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).
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.
This document has been edited by AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
In the UK, this document is intended exclusively for professional investors, as defined in Annex II to the Markets in Financial Instruments Directive 2014/65/EU ("MiFID"). Circulation must be restricted accordingly.
© AXA Investment Managers 2018. All rights reserved