Q3 earnings’ results look decent vs reduced expectations. 2020 forecasts remain optimistic but dovish Central Banks and early signs of an economic trough help. Remain positive on equities.

Highlights:

• The Q3 reporting season has advanced to cover about 40% in the US and Europe. At the index level in the US, both the earnings and sales’ yearly growth dropped (to -0.5% and +3.7%) compared to the previous quarter: Energy and Materials suffered. Sharply reduced analysts’ expectations have been beaten for both earnings and sales.
• Ex-Energy & Materials, US yearly growth is in positive territory: at 4.9% and 6.3% for earnings and sales, respectively.
• While the earnings growth in Europe (-2.4%) has likewise decreased, the EA’s one has experienced a turnaround (from -6.9% to 2.5%) – largely due to unusually positive results in Health Care and Utilities. The sales growth has somewhat increased (to 2.4% and 3.9%, for Europe and the EA respectively).
• For these reasons, while we see a relatively good continuation of the Q3 reporting seasons, we still expect 2020 estimates to be reduced further.
• That said, global dovish monetary policies and early signs of a stabilization in the most cyclical sectors of the economy should continue to support equities.

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