FOLLOW the EARNINGS

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June 30, 2017

Bernstein's quarterly white paper, "Follow the Earnings," by Kathleen Fisher, Head of Wealth and Investment Strategies, squarely addresses the anxiety many clients feel about one of the longest rallies since World War II. The market's persistence really isn't so mysterious, she explains: "The uptrend in equity markets around the world in recent quarters reflects an upswing in expected earnings growth. While EPS growth and market returns are not necessarily correlated over a full market cycle, today's modest, but synchronous, mid-cycle acceleration in global economic growth is providing support to both."

Kathleen discusses the causes of the earnings rebound, which differ somewhat by region as well as the risks we see, valuations, and the market's eerie calm. We continue to find the European and emerging-market stock markets more attractively valued, and overweight them within client portfolios with Dynamic Asset Allocation.