Investors in Japan, France and Germany can expect upside surprises as global earnings momentum demonstrate their strongest run since the financial crisis, according to BlackRock.
Chief investment strategist Richard Turnill says global financials and technology will be standout sectors – the former driven by steeper yield curves and improving net interest margins while technology revenues will be lifted by long-term demand.
Following the trail blazed by the US in the second half of 2016, Turnill believes world growth will start to grip across other developed markets.
“Japan’s earnings are particularly impressive. The December quarter pre-tax profits rose 11 per cent on the year to the highest level in a decade.”
Further, he points out the rebound in commodity prices, a softer euro and stronger economic growth are setting up European earnings to enjoy their best quarter since 2011.
But investors are just warming up to Japanese and European shares − one reason we favour both over the US.
“Our analysis shows few signs of overly bullish positions on Japanese and European equities, suggesting more room for investors to step in.”