Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Leadership widening as earnings improve
The earnings revision ratio for global stocks is back above zero – which means a greater number of companies are seeing upgrades to earnings forecasts than downgrades. See chart.
Structural support plus a cyclical boost
We explore cyclical, economically sensitive sectors that are also supported in the long term by the move toward decarbonization, reshoring and the rise of AI.
Is now the time to consider Europe and the UK?
We see several sources of support for these regions, including improved earnings, a better economic outlook, and cheap valuations.
At BlackRock Fundamental Equities, we expect markets to retain the same focus on rates and inflation in the second half of the year, and for artificial intelligence (AI) to keep capturing attention.
Market leadership may broaden out as earnings come through across sectors. The earnings revision ratio for global stocks is back above zero – which means a greater number of companies are seeing upgrades to earnings forecasts than downgrades. See the chart below. And rate cuts may support more cyclical areas of the market. So even as AI remains in focus, we expect to see a broader set of winners for active managers to unearth – a ripe environment for stock selection.
LSEG DataStream, BlackRock Investment Institute, June 11, 2024. The chart shows the number of upward EPS estimates minus downward estimates as a share of total estimates, for companies in the MSCI World Index.
We believe both these sectors are poised to benefit from falling rates, as well as from long-term investment in the transition to a low-carbon economy.
We see signs of a cyclical upswing in the semiconductor industry – which is also supported by the rise of AI and data center demand.
Construction volumes are likely to rebound from low levels, in our view, and also benefit from the investment in building renovation, reshoring and data center demand.
In these regions, earnings have rebounded, economies are showing signs of life and valuations remains at attractive levels, in our view.
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