Content navigation
A mixed reporting for markets, skewed by the Magnificent Seven
The Q4 2023 reporting season has come towards its end. The US and Japan are 100% complete, with Europe and Emerging Markets, 75% and 64% complete respectively. We review the key highlights from this round of reporting below.
Mixed reporting season overall
Overall, the reporting season has been mixed in terms of sectors, with ‘Big Technology’ (i.e. the Magnificent Seven) being a key area of support. Although even within that sector, there has been some element of disparity in the outcomes. Consumer Discretionary and Financials have been posting positive earnings surprises across many geographies. Utilities, Telecoms and Real Estate were the sectors with most consistently negative earnings. But Telecoms was the one sector showing the strongest earnings growth across most geographies.
Geographically, the US has seen strong reporting at the headline level, but this has been driven by only a handful of sectors, led by Technology (Tech). Japan has also seen a positive reporting season, somewhat helped by the Yen weakness. In contrast, Europe experienced a weak reporting reason, with ongoing earnings downgrades as a result, and negative year-on-year growth. Emerging Markets (EM) results were even weaker than Europe, notably dragged down by China.
In terms of margins, the US and Japan have exhibited margin improvements at the headline level, although for the US, this has been in large part driven by the Tech sector. Europe and EM experienced margin erosion, the latter in an even more pronounced way.
In terms of earnings momentum, we continue to see downside risk to US and Global earnings growth expectations for 2024. Whilst in Europe, with earnings estimates having come down, these are now closer to our top-down estimates. We continue to forecast pedestrian earnings growth this year, with our top-down estimates remaining unchanged (from December 2023), as shown below.
Region | Martin Currie 2024 Earnings Growth estimates (%) | Consensus 2024 Earnings Growth estimates (%) |
---|---|---|
US | +6 | +10 |
Global | +5 | +10 |
Europe | +3 | +4 |
Asia ex Japan | +5 | +17 |
Japan | +6 | +11 |
Source: Martin Currie and Bloomberg as at 26 March 2024.
-
A mixed reporting for markets, skewed by the Magnificent Seven
Consensus estimates at risk of further downgrades
In the table above, we have also compared our estimates with consensus. The estimates for the Global, US and European consensus are all from the back end of last year. Whilst the Asia and Japan estimates have been increasing.
Q4 2023 | US (SPX) | Magnificent Seven | Europe (SXXP) | Eurozone (SXXE) | Japan (Topix) | EM (Bloomberg EM Index) |
---|---|---|---|---|---|---|
% of companies that reported | 100% | 100% | 75% | 82% | 100% | 64% |
% companies that beat on sales | 55.7% | 85.7% | 38.3% | 34.1% | 49.5% | 45.1% |
Sales surprise | 1.2% | 1.9% | (2.6%) | (4.7%) | 2.1% | 0.4% |
% companies that beat on earnings | 76.0% | 85.7% | 44.3% | 47.3% | 55.6% | 43.5% |
Earnings Surprise | 7.2% | 6.9% | 2.8% | 5.9% | 10.5% | (8.0%) |
Sales growth YoY | 3.9% | 15.0% | (6.1%) | (5.2%) | 3.1% | (0.5%) |
Earnings growth YoY | 8.0 | 56.1% | (11.1%) | (0.1%) | 42.3% | (21.1%) |
Source: Bloomberg as at 26 March 2024. SPX is S&P 500, SXXP is Euro Stoxx 600, SXXE is Euro Stoxx. Magnificent Seven are: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Telsa.
All data quoted in text unless otherwise specified is from Bloomberg as at 26 March 2024.
Important Information
This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’), authorised and regulated by the Financial Conduct Authority. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
The information contained in this document has been compiled with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this document for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.
This document is intended only for a wholesale, institutional or otherwise professional audience. Martin Currie Investment Management Limited does not intend for this document to be issued to any other audience and it should not be made available to any person who does not meet this criteria. Martin Currie accepts no responsibility for dissemination of this document to a person who does not fit this criteria.
The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.
Past performance is not a guide to future returns.
The distribution of specific products is restricted in certain jurisdictions, investors should be aware of these restrictions before requesting further specific information.
The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
Please note the information within this report has been produced internally using unaudited data and has not been independently verified. Whilst every effort has been made to ensure its accuracy, no guarantee can be given.
Some of the information provided in this document has been compiled using data from a representative account. This account has been chosen on the basis it is an existing account managed by Martin Currie, within the strategy referred to in this document.
Representative accounts for each strategy have been chosen on the basis that they are the longest running account for the strategy. This data has been provided as an illustration only, the figures should not be relied upon as an indication of future performance. The data provided for this account may be different to other accounts following the same strategy. The information should not be considered as comprehensive and additional information and disclosure should be sought.
The information provided should not be considered a recommendation to purchase or sell any particular strategy/fund/security. It should not be assumed that any of the securities discussed here were or will prove to be profitable.
It is not known whether the stocks mentioned will feature in any future portfolios managed by Martin Currie. Any stock examples will represent a small part of a portfolio and are used purely to demonstrate our investment style.
Risk warnings – Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.
- Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
- This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
- Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
- Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets.
- The strategy may invest in derivatives Index futures and FX forwards to obtain, increase or reduce exposure to underlying assets. The use of derivatives may result in greater fluctuations of returns due to the value of the derivative not moving in line with the underlying asset. Certain types of derivatives can be difficult to purchase or sell in certain market conditions.
For wholesale investors in Australia:
This material is provided on the basis that you are a wholesale client. MCIM has entered an Intermediary arrangement with Franklin Templeton Australia Limited (ABN 76 004 835 849) (AFSL No. 240827) (FTAL) to facilitate the provision of financial services by MCIM to wholesale investors in Australia. Franklin Templeton Australia Limited is part of Franklin Resources, Inc., and holds an Australian Financial Services Licence (AFSL No. AFSL240827) issued pursuant to the Corporations Act 2001.
For professional investors in Canada.
This material is intended for residents in, or incorporated in, Canada and are a Permitted Client for the purposes of MI 31-103. The information on this section of the website is not intended for use by any other person, including members of the public.
Martin Currie Inc, incorporated in New York with its registered office at 280 Park Avenue, New York, NY 10017 and having a UK branch registered in Scotland (no SF000300), Head office, 5 Morrison Street, 2nd floor, Edinburgh, EH3 8BH, Tel: +44 (0) 131 229 5252 Fax: +44 (0) 131 222 2532 www.martincurrie.com, operates under the International Adviser Exemption with the Ontario Securities Commission (‘OSC’) and is therefore currently not required to be registered as a portfolio manager for the purposes of MI 31-103. Martin Currie Inc. is also authorised by the UK Financial Conduct Authority.
For the avoidance of doubt, nothing excludes, limits or restricts our obligations to you under the UK Financial Services and Market Act 2000, National Instruments or any other applicable law or regulation.
The opinions and views in this website do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you.
This website does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You should consult with your professional advisers before undertaking any investment activity. The information provided on this website should not be treated as advice or a recommendation to buy or sell any particular security or other investment. The information on this website has not been reviewed by any competent regulatory authority.
For professional investors:
In the People’s Republic of China:
This document does not constitute a public offer of the strategy, whether by sale or subscription, in the People’s Republic of China (the “PRC”). These strategies are not being offered or sold directly or indirectly in the PRC to or for the benefit of, legal or natural persons of the PRC.
Further, no legal or natural persons of the PRC may directly or indirectly purchase any of the strategy or any beneficial interest therein without obtaining all prior PRC’s governmental approvals that are required, whether statutorily or otherwise. Persons who come into possession of this document are required by the issuer and its representatives to observe these restrictions.
In Hong Kong:
The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.
In South Korea:
This document is for information purposes only. It is prepared and presented to provide an introduction to the business of MCIM and its related companies (collectively known as ‘Martin Currie’). This document does not constitute an offer to sell or a solicitation of any offer to invest in any security, fund or other vehicle managed or advised by Martin Currie.
None of the security(ies), fund(s) or vehicle(s) managed by or advised by Martin Currie are registered in South Korea under the Financial Investment Services and Capital Markets Act of Korea and accordingly, none of these instruments nor any interest therein may be offered, sold or delivered, or offered or sold to any person for re-offering or resale, directly or indirectly, in South Korea or to any resident of South Korea except pursuant to applicable laws and regulations of South Korea.
Martin Currie is not registered with or regulated by any regulatory authorities in South Korea.