Het gaat al meer dan een jaar niet zo best met de Amerikaanse winstverwachtingen. Wat als voordeel heeft dat de lat erg laag ligt voor positieve verrassingen. Economische indicatoren in de VS lieten onlangs een onverwachte opleving van de industrie en de dienstensector zien. De verwachtingen zijn dus aan de beterende hand.
Onderzoeken over inkoop van het Institute of Supply Management signaleerde een herstel dat groter is dan werd verwacht. De productie-index gaf een groei aan over september. In beide gevallen was het aantal bestellingen toegenomen na een aantal slechte maanden. Deze ontwikkeling was niet verwacht. Dat betekent dat zelfs als de winsten tegenvallen in Q3, de verwachtingen in de tussentijd voldoende zijn verbeterd.
Met betrekking tot de tactische asset allocatie stelt LGT zich terughoudend op. Dit betekent een selectieve keuze voor beleggingscategorieën die profiteren van het huidige monetaire beleid. LGT is daarom overwogen in US aandelen. Gezien de sterke rally in wereldwijde aandelen sinds begin juni, verwacht LGT een consolidatie in de komende maanden.
LGT: The Market is Right in the End
US earnings forecasts have been falling for more than a year, lowering the bar for positive surprises. In addition, leading economic indicators in the US recently signaled an unexpected rebound in manufacturing and services. We would revisit our moderately defensive posture on further evidence that the market outlook has improved on a broader basis.
US earnings are expected to have dropped
The US corporate reporting season for the third quarter of 2012 began yesterday amid a cautious analyst consensus. Earnings per share (EPS) for the S&P 500 companies are predicted to have fallen by close to 2% from a year earlier. The buoyant stock market does not seem to agree. The S&P 500 is unchanged on the week, but up 7.5% on the quarter and 21% from a year ago, significantly outperforming every other major benchmark except for Germany’s DAX price index (up 23% on the year, see page 2) – that’s not exactly a generally pessimistic message. So, who is right?
Ultimately, the market is right, not the analysts
On page 3, we list the estimated EPS growth rates at the start of each earnings season and the actual results, starting with Q1/2007. It is evident that the consensus has been consistently off the mark in the past 22 quarters. More precisely, the consensus estimate has been overestimating earnings during the financial crisis of 2007 and 2008, and underestimating them since the recovery started in early 2009. In fact, the current US bull market began almost exactly when analysts’ predictions moved from being too optimistic to being too pessimistic in relative terms.
Will it be different this time?
Returning to the present, we wonder whether corporate earnings will indeed turn out to be as weak as analysts predict, or even weaker. Will profit margins finally have peaked, as was pronounced repeatedly in various research publications over the past couple of years? One can never exclude short- term disappointments or external shocks, of course, particularly given several important outstanding issues that create economic uncertainty (“fiscal cliff” in the US, a re-escalation of the eurozone crisis, ineffective stimulus/slowdown in China, etc.).
Consensus should be viewed as a contrarian indicator
But it is also clear that analyst estimates can sometimes be a contrarian indicator. What really matters over time is not the direction of earnings revisions, but the direction relative to reality. We have already mentioned that the current bull market began when the consensus began systematically underestimating actual earnings, i.e. in Q1/2009. There are also more recent examples: in the current cycle, EPS forecasts began falling around September 2011, declining by 8% to 10% for 2012 and 2013 – but the S&P 500 has rallied by 28% during that time (with 85% of the gain booked by May 2012, i.e. before hopes of a new round of central bank actions became a market-driving factor). Furthermore, in the preceding period from January to September 2011, EPS estimates rose by about 4% for both years, and the S&P 500 lost about 10%. Therefore, we should perhaps rather worry about the market when analysts start to raise estimates. But that has not happened yet.
Leading economic indicators suggest improving business outlook
In addition, it is noteworthy that some leading economic indicators in the US have started to signal a potentially significant improvement in business activity going forward. Specifically, the Institute of Supply Management’s purchasing manager surveys for the services industries suggested stronger-than- expected activity going forward, and the manufacturing index returned to growth in September. In both cases, new orders rebounded strongly after several months of weakness – a development that had not been predicted by the consensus. This means that even if Q3 earnings were to disappoint, the business outlook might have improved sufficiently in the meantime.
We would review our positioning if markets and data confirm brighter outlook
With regards to our tactical asset allocation, we keep our moderately defensive overall positioning, which incorporates selected exposures to assets that benefit from current monetary policies, including an overweight in US equities (see p. 4). Given the strong rally in global equities since early June, we still believe a consolidation is due in coming months. However, we would review our positioning if economic data, corporate earnings, and the markets themselves, continue to confirm that the outlook has indeed improved sufficiently on a broader and more global basis.
