Citigroup Says Buy Global Stock Dip as Earnings Worries Overdone
Markets pricing in earnings contraction for 2019, Citi says.
(Bloomberg) -- Concern about an earnings slowdown next year is overdone and investors should buy this dip in global equities, according to Citigroup Inc.
Global stock markets are pricing in a one percent contraction in earnings-per-share in 2019, wrote strategists including Robert Buckland in a note Thursday. This compares with an average analyst estimate of 8 percent growth, and a Citi expectation of 5 percent, they said.
“Equity markets have already moved to price in bigger downgrades than other macro factors or Citi strategists predict,” wrote Buckland, a 20-year veteran at the bank, and his colleagues. “Of course 2019 will be a tougher year for EPS than 2017 or 2018, but not that much tougher.”
For the first time since President Donald Trump was elected, profit forecasts for next year are being lowered as doubts grow about global economic growth. But that doesn’t necessarily mean investors should brace for losses. Citi’s analysis showed that while there were 21 years of downward revisions to profit estimates over the last three decades, stocks went up in 14 of them.
The MSCI AC World Index has fallen around 10 percent from a late-September peak and is down about 7 percent so far this year.
--With assistance from Cormac Mullen.
To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Cormac Mullen, Margo Towie
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