Q2 earnings end above consensus, with the US leading. Expect better growth ahead

Compared to our latest – positive – comment on the 20th of July, the yearly earnings growth of the median
sector has improved both in the US and Japan, while the picture is less clear in Europe.

Highlights:

  • The Q2 reporting season has contributed to sustain equity momentum and next earnings
    development should continue to do so.
  • Surprises and growth for Q2 look better than feared and we notice an improvement in earnings since our last update in late July. Instead, sales have worsened.
  • The US maintains leadership and the appreciating trade-weighted euro along with oil price trend should add to the positive S&P 500 earnings momentum.
  • In the next quarters numbers should improve thanks to the policy action and continuing recovery.
  • While it will be a bumpy road, earnings development should be enough to sustain positive returns ahead and a rotation towards the value-cyclical names and sectors.
  • Among risks we consider: higher-than-expected Covid infections, Hard Brexit, US election with a
    blue wave as a threat to IT, energy, pharma and tobacco sectors, in particular.

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