US | Q1 earnings: upward revisions continue for now
US earnings growth continues to surprise to the upside, with more cyclical sectors leading the way in the Q1 earnings season. This positive momentum supports our existing overweights on Financials, Materials and Industrials.
However, longer-term expectations appear overly optimistic. The bottom-up consensus points to an ongoing profit margin expansion over the next few years and we think this is unlikely against a backdrop of rising cost pressures and proposals for higher corporate tax rates.
We see scope for downward revisions to EPS forecasts as attention turns towards 2022 later this year, and this could prove a headwind for US equities in the context of elevated valuation multiples.
US: High debt costs suggest an industrial correction
The scale of the increases in debt costs, coupled with the low-yielding environment makes some repricing highly likely for gateway US industrial markets over the coming quarters.Find Out More
High debt costs suggest European office price correction
Our analysis suggests a 10% correction is needed on average for the major office markets in Europe to compensate for the higher cost of debt, with prime yields required to soften by 10bps-75bps to generate a low-risk interest coverage ratio at a reasonable LTV.Find Out More