16th November 2017
Jean-Louis Richard, Senior Financial Analyst
Autumn is the most favoured season for stock exchange crashes. A convincing explanation is that the publication of the third quarter results gives no more choice to the financial community but to compare its expectations and company forecasts with the numbers published after 9 months. The optimism that prevails at the beginning of the year is usually dampened month after month, especially so in September and October.
This year, earning expectations did not follow this pattern: projected earnings for 2017 are today almost at the same level as in January. Furthermore it is now possible to come to conclusions regarding the third quarter results. They are notably better than expected, +9% in Europe. The best sector is energy (+54%), while materials (+17%) also achieves an excellent performance. The rise is more marked for cyclical than defensive stocks. Health care companies for example gained only +1%. However, real estate (defensive) gained +21%, while financials (cyclicals) appreciated only +2%.
For the whole year, European equities should post average gains of their earnings of +12%. Given that the end of year is now close, and the rising trajectory of the economy worldwide, the risk of disappointment of this projection is small. For 2018, an additional rise of +9% is hoped for. As usual, this figure is of course subject to many revisions.