MARKT & ECONOMIE - FOR PROFESSIONAL INVESTORS

Our views for the fourth quarter

02/okt/2017
By BlackRock Investment Institute

Growth is cruising at above-trend rates across the world. We expect inflation to pick up in the US but to move sideways at low levels in the eurozone. This means monetary policy divergence is back. Remarkably steady growth is fostering subdued market volatility. We see this providing fertile ground for risk-taking in equities and emerging market (EM) assets.

The global economic expansion is providing a positive backdrop for corporate earnings. All major regions are posting earnings-per-share growth higher than 10% for the first time since 2005, excluding the post-crisis bounce, our research shows. Analyst forecasts are holding steady in the US and Europe, Japan is up and EM earnings expectations have almost doubled this year. See the chart below. These trends give us comfort taking risk in stocks.

Earning their keep
Analyst forecasts of 2017 corporate earnings growth

Eye of the beholder

Sources: BlackRock Investment Institute, with data from Thomson Reuters, September 2017.
Note: The lines show the path of aggregate analyst expectations of 2017 earnings growth for companies in various regions.

Themes

Sustained expansion: the increasing breadth of the global economic expansion is pointing to a longer lifespan. We believe this underpins our positive stance on equities – and the momentum style factor. Rethinking risk; rethinking returns: spotting systemic risks in advance is difficult, but we see none on the immediate horizon that might undercut the current expansion. We favour taking advantage of temporary market sell-offs – particularly in the current environment of low volatility and solid corporate earnings.

Risks

Policy missteps or miscommunications cannot be ruled out as the Fed and some other central banks reduce accommodation. China’s economy could slow if the country re-emphasises reforms over short-term growth after a crucial party congress. Geopolitical risks also lurk. But we see few triggers that could shock markets out of their low-volatility regime reinforced by steady growth.

Markets

Structurally lower yields underpin our positive view on equities and other risk assets. We are bullish on EM: valuations are attractive, investors are returning and EM stocks are increasingly tilted toward high growth companies. We like European and Japanese stocks and prefer equities overall to credit, where much good news appears priced in. We like the momentum and value equity style factors.

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Global Chief Investment Strategist, BlackRock Investment Institute
Richard Turnill is Global Chief Investment Strategist for BlackRock. He was previously Chief Investment Strategist for BlackRock’s Fixed Income and active...
Jean Boivin
Head of Economic and Markets Research
Jean Boivin, PhD, Managing Director, is Head of Economic and Markets Research at the Blackrock Investment Institute.
Chief Multi-Asset Strategist
Chief Equity Strategist
Chief Fixed Income Strategist

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