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Global Investment Views: Equity - February 2018

Perspectives» |

February 20, 2018

A Pause is Welcome, in an Upbeat Market

The pause we were calling for finally arrived in the market, opening new opportunities for entering the market at healthier levels.

This year’s strong start for equity markets reflected the optimism regarding a continuation of the positive earnings outlook, in a context of solid (and accelerating) global growth. Capex revival is an emerging theme which could support the continuation of this strong market environment... Fundamentals of the market are still very positive, but caution is warranted as the market remain vulnerable to corrections. Attention to earnings sustainability will remain key in this phase.


After a period of relative underperformance vs other DM in 2H17, we expect EU equities to return to the spotlight, thanks to a virtuous circle of strengthening economic outlooks, good EPS momentum, increasing capex and dynamic M&A activity both in large- and mid-caps. We still favour cyclical themes, and selective idiosyncratic stories. A risk in the market is a stronger appreciation of the euro, but this should be well balanced out by the other positive forces mentioned above. So, we expect EPS growth to remain around 10% in 2018.

United States

Risks regarding US equity remain more due to tactical issues than to fundamentals. EPS growth is very strong in the US and tax reform is further reinforcing this situation: the effect of the tax reforms, in our view is not fully incorporated into EPS forecasts, and positive upside revisions are still likely in this first part of the year. Some areas of the market (Growth) are very expensive, but we still see opportunity in Value, supported by better earnings growth due to the tax reform and robust nominal GDP growth. Tax reform should also provide additional upside for specific consumer and retail stocks whose valuations reflect broken business models. The housing repair and remodeling theme is strong and accelerating with a still attractive valuation. Clearly, due to the extension of the bull market despite the recent correction, stock picking and sector rotation are key to avoiding the most overcrowded trades and providing quality at reasonable prices.

Emerging Markets

Q3 reporting season closed with a very good positive momentum. Investors’ flows are coming back. We see room for flows to rise further, due to the positive earnings outlook linked to the synchronization of global growth and improving productivity. Valuations are relatively attractive compared to DM. Asia is the most appealing area (China is attractive, while India is a bit expensive), followed by EMEA (linked to the European renaissance theme) and LatAm. The latter is exposed to the risk of NAFTA negotiation and the heavy electoral cycle in 2018. The commodity outlook could improve the picture. In Brazil, we believe it worth playing themes related to the gradual but ongoing economic turnaround.


At the sector level in EM, we favour cyclicals (especially financials and tech) over defensive. The EPS forecasts remain supportive for IT, but we expect this situation to become more widespread among different sectors (such as consumer discretionary) in 2018.


Important Information


Unless otherwise stated, all information contained in this document is from Amundi Pioneer Asset Management (“Amundi Pioneer”) and is as of February 16, 2018.


The views expressed regarding market and economic trends are those of the authors and not necessarily Amundi Pioneer, and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading on behalf of any Amundi Pioneer product. There is no guarantee that market forecasts discussed will be realized or that these trends will continue. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested.

This material does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any service.


Date of First Use: February 16, 2018.

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Contributing Authors

Ken Taubes
CIO of US Investment Management, Amundi Pioneer


Diego Franzin
Co-Head of Equities, Amundi

Mauro Ratto
Head of Emerging Markets, Amundi
Ken Taubes
Executive Vice President,
Chief Investment Officer, US