Page 26 - DIY Investor Magazine - Issue 25

AFTER THE STORM:
EARNINGS ESTIMATES STABILISE
Despite increasing fears of a second wave of COVID-19 infections, consensus 2020 earnings forecasts have remained stable over the past 4 weeks.
Exhibit 1: Global COVID-19 downgrade cycle complete
The COVID-19 downgrade cycle appears complete on a global basis, provided widespread second lockdowns can be avoided.
Source: Refinitiv, Edison calculations.
We recognise that the transition away from national government COVID-19 employment subsidies might lead to challenging unemployment data during Q4. However, for now at least there are no adverse trends in consensus revisions.
Exhibit 2: US earnings have held up better than Europe
The new equity market equilibrium in Europe is lower earnings and lower interest rates which in combination result in stable but modestly lower markets compared to the start of 2020. US estimates have held up better during 2020 which may explain in part the relatively better US market performance observed year to date.
DIY Investor Magazine | Sept 2020 26