By Philip Lawlor, head of Global Investment Research
The pace of recovery has begun to diverge across economies, with vaccination progress and the scale of government stimulus among the biggest swing factors. And investors are increasingly discriminating between these economic haves and have-nots.
Number of vaccinations per 100 people – US and UK are well ahead of global peers
US and UK recoveries speed ahead, others stall
GDP forecasts for this year and next have mirrored these public health and economic shifts. In its most recent report, the IMF raised its global GDP forecasts for 2021 (see chart below), most significantly for the US (up 1.3 percentage points to 6.4%) and the UK (up nearly one percentage point to 5.3%).
Upgrades were more modest elsewhere, particularly the Eurozone and emerging markets, where resurging Covid-19 cases and extended lockdown restrictions have hindered economic re-openings.
Latest IMF GDP growth forecasts versus January forecasts (%)
These macro disparities have also begun filtering into EPS growth expectations. As highlighted in the chart below, consensus 2021 EPS growth forecasts have risen in Asia Pacific, the US and UK over the past three months, while declining for the Eurozone and EM. Estimates for 2022 have also been lowered, albeit modestly.
Regional consensus EPS growth forecasts (%)
Cyclically sensitive sectors (notably basic materials and industrials) have dominated the upgrades to consensus 2021 EPS growth forecasts from three months ago, though technology and health care have also seen upward revisions. Defensive, stable-growth sectors, led by consumer staples, have seen the biggest downgrades. Energy saw the most severe cutbacks, reflecting the softening in oil prices over the period.
This post first appeared on April 22 on the FTSE Russell blog.
Photo Credit: Yuri Samoilev via Flickr Creative Commons
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