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Boiling down two changes to BlackRock’s asset class views

Ramzi Rizk Eye Em / Getty Images
Ramzi Rizk Eye Em / Getty Images

We have upgraded our tactical view of U.S. equities to overweight from neutral. The reason: Impending fiscal stimulus is supercharging U.S. earnings growth expectations. We have shifted our view on European equities to neutral as a result. Earnings momentum is solid in Europe-but lags that of other regions Our U.S. upgrade boils down to a fundamental story underpinned by earnings growth. An added bonus: U.S. valuations look slightly more attractive after the February stock market swoon. Economic strength was already changing the tone of earnings momentum, but U.S. tax cuts and government spending plans lit a fire under the trend. The chart below illustrates the sharp acceleration in U.S. earnings upgrades as analysts factored in the stimulus.

The ratio of upgrades to downgrades for U.S. large caps (the orange line) stands at the highest level since the data series started in 1988. Upward revisions are solid globally, but the U.S. strength is unmatched. Japan is unique, as earnings revisions there tend to be noisy. We see the strong U.S. earnings momentum persisting in the short term and leading to higher returns.

Earnings growth eclipses valuations

Richard room to run EPS Weekly commentary Richard Turnill is BlackRock's global chief investment strategist. He is a regular contributor to The Blog In the latest episode of The Bid podcast, our Chief Fixed Income Strategist Jeff Rosenberg talks about the risks we foresee in the year ahead and the role of fixed income in a market environment that's heating up.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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