Q1 results for the US and EU have improved. Further improvement needs macro data to progress but trade and geopolitical risks are clear threats.

The Q1 reporting season has improved visibly in the US at the yearly growth of +6% and 3.7% for earnings and sales, respectively. The surprises vs expectations are high, too: 4.6% and +0.36%.

Highlights:

  • The Q1 reporting season has improved visibly in the US at the yearly growth of +6% and 3.7% for earnings and sales, respectively. The surprises vs expectations are high, too: 4.6% and +0.36%.
  • US Q1 earnings estimates’ drop has been massive during the last year, thus helping current beat.
  • EU results are positive, too, showing – for the median sector – an earnings growth of +6% and 3.4% for sales. Surprise vs analysts’ expectations is +4.4% for earnings and +1% for sales.
  • Concerning earnings for European styles, Value and Large caps beat Growth and Small capes.
  • Japanese numbers are weak, mirroring weaker exports and investments.
  • US and EMU revisions are trending better thanks to decent Q1 results and stabilizing macro surprises. But growth estimates for 2020 and 2021 remain sanguine.
  • The stabilization in the macro indicators and, most of all, the reaffirmed dovish stance by central banks supports a positive mid-term outlook for profits.
  • That said, increasing trade and political risks are affecting firms’ confidence, inducing a milder and slower rebound in both macro indicators and earnings versus current expectations: we stay moderately positive into year end on equities, but keeping a rather neutral near-term stance, with risks of further downside correction.

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Q1 RESULTS FOR THE US AND EU HAVE IMPROVED. FURTHER IMPROVEMENT NEEDS MACRO DATA TO PROGRESS BUT TRADE AND GEOPOLITICAL RISKS ARE CLEAR THREATS.

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