BlackRock raises U.S. equities to overweight on earnings momentum


LONDON (Reuters) – The world’s biggest asset manager BlackRock has upgraded its view on U.S. equities to “overweight”, citing very strong earnings momentum, while cutting European stocks to neutral. In a note on Monday, BlackRock’s global chief investment strategist Richard Turnhill pointed to tax cuts in the United States and government spending plans as driving earnings growth and said the ratio of earnings upgrades to downgrades for U.S. large caps was at its highest since records began in 1988. Turnill said that the pullback in equity markets in early February made U.S. valuations look slightly more attractive. “We believe the coming positive effects of new U.S. tax and spending plans are still underappreciated by markets,” BlackRock’s Turnill said in a note. “We find earnings growth matters more than valuations over shorter time horizons at this stage of the bull market,” Turnill said, adding: “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.” Turnill noted that while earnings momentum in Europe was robust, it lagged other regions while the euro’s strength was a “source of pain”. The S&P 500 .SPX index is up more than 2 percent this year, while Europe’s STOXX 600 is down nearly 3 percent. Reporting by Kit Rees and Thyagaraju AdinarayanOur Standards:The Thomson Reuters Trust Principles.
Source: Reuters