AdviserVoiceWhere in the world should investors look for earnings? - AdviserVoice https://www.adviservoice.com.au/2024/06/where-in-the-world-should-investors-look-for-earnings/ Financial planner information & financial planner education/CPD - AdviserVoice Thu, 04 Jun 2026 21:30:42 +0000 en-US hourly 1 https://wordpress.org/?v=7.0 Where in the world should investors look for earnings? https://www.adviservoice.com.au/2024/06/where-in-the-world-should-investors-look-for-earnings/ https://www.adviservoice.com.au/2024/06/where-in-the-world-should-investors-look-for-earnings/#respond Wed, 26 Jun 2024 21:40:50 +0000 https://www.adviservoice.com.au/?p=96480 Stock prices move in concert with earnings over time. For the past decade and a half, the MSCI USA Index has produced the strongest earnings growth on the planet. From 2009 to 2023, reported earnings from MSCI USA companies have grown 184%. US earnings growth was better than Japan (129% earnings growth), significantly stronger than Europe (44% earnings growth), and significantly stronger than emerging markets (5% earnings growth).

As a result, the US equity market has substantially outperformed Japan, Europe and emerging markets as a whole.

Chris Galipeau, Senior Market Strategist and Lukasz Kalwak, Senior Analyst at the Franklin Templeton Institute note (in the attached detailed paper) noted “The global earnings situation is changing. US earnings should still be strong, but we think emerging markets offer even better performance potential. Equities in Japan and Europe also look stronger to us than they have in the past 15 years.”

“Valuations matter along with earnings. While earnings drive stock prices over time, prices fluctuate as estimated earnings valuations oscillate for extended periods. In our view, long-term investors should consider various valuation methods as part of their toolkit.

“Another valuation method to consider is the price of stocks relative to earnings growth, which is known as the PEG ratio. We can use this measurement for both historical and forward-looking comparisons. We have compared the current price relative to the average earnings growth of the past 10 years, as well as the price relative to expected earnings for 2024, 2025 and 2026.2 In the historical comparison, while all markets appear to be undervalued relative to the past 10 years, the gap is the largest for emerging markets.

“Looking forward, emerging markets also appear to have the most attractive PEG ratios relative to expected earnings through 2026.

“When comparing equity opportunities, we believe investors may be well served to consider future earnings growth along with valuation measures. Based on our comparisons emerging markets, as represented by the MSCI Emerging Markets Index, show the strongest forward earnings growth combined with the lowest valuation backdrop.

“Regarding valuation, emerging markets appear undervalued, whether one considers the more traditional P/E multiple or if one also contemplates the forward price-to-earnings-growth measure (PEG ratio).”

]]> Stock prices move in concert with earnings over time. For the past decade and a half, the MSCI USA Index has produced the strongest earnings growth on the planet. From 2009 to 2023, reported earnings from MSCI USA companies have grown 184%. US earnings growth was better than Japan (129% earnings growth), significantly stronger than Europe (44% earnings growth), and significantly stronger than emerging markets (5% earnings growth).

As a result, the US equity market has substantially outperformed Japan, Europe and emerging markets as a whole.

Chris Galipeau, Senior Market Strategist and Lukasz Kalwak, Senior Analyst at the Franklin Templeton Institute note (in the attached detailed paper) noted “The global earnings situation is changing. US earnings should still be strong, but we think emerging markets offer even better performance potential. Equities in Japan and Europe also look stronger to us than they have in the past 15 years.”

“Valuations matter along with earnings. While earnings drive stock prices over time, prices fluctuate as estimated earnings valuations oscillate for extended periods. In our view, long-term investors should consider various valuation methods as part of their toolkit.

“Another valuation method to consider is the price of stocks relative to earnings growth, which is known as the PEG ratio. We can use this measurement for both historical and forward-looking comparisons. We have compared the current price relative to the average earnings growth of the past 10 years, as well as the price relative to expected earnings for 2024, 2025 and 2026.2 In the historical comparison, while all markets appear to be undervalued relative to the past 10 years, the gap is the largest for emerging markets.

“Looking forward, emerging markets also appear to have the most attractive PEG ratios relative to expected earnings through 2026.

“When comparing equity opportunities, we believe investors may be well served to consider future earnings growth along with valuation measures. Based on our comparisons emerging markets, as represented by the MSCI Emerging Markets Index, show the strongest forward earnings growth combined with the lowest valuation backdrop.

“Regarding valuation, emerging markets appear undervalued, whether one considers the more traditional P/E multiple or if one also contemplates the forward price-to-earnings-growth measure (PEG ratio).”

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