Patrick Moonen, principal strategist multi-asset, NN Investment Partners said expectations are not running high and consensus estimates indicate a decline of 1.6% in Q3.
“This does not seem a high hurdle to clear,” Moonen noted. “In July, analysts were still expecting 1% growth in earnings. The important macro drivers of oil, US Dollar and interest rates have turned from headwinds in the previous quarters into a more neutral influence. “What is also important is that this quarter will show consequential improvement that will continue in Q4 and Q1 2017, driven by favourable base effects of the above-mentioned important drivers.
“For the year as a whole, consensus expectations are for zero growth accelerating to 13.9% in 2017,” Moonen continued. “We doubt that next year US earnings will grow by double-digits, taking into account the level of corporate margins and wage-related pressure, but we do believe in the trend acceleration.”
Moonen also noted that bond yields have risen further and the US yield curve has steepened. “This is an important factor behind the outperformance of the financial sector. Especially against a bond-proxy like utilities, this is clearly visible,” he said.
“Better macro data, tighter monetary policy, higher commodity prices and a bigger likelihood of fiscal spending could feed this trend further.”
NN IP also said that globally, economic data continues to come in above expectations. NN IP’s proprietary ‘global cycle indicator’, which measures momentum in sentiment data, has turned positive again after a brief period in negative territory, the firm said.
