J. P. Morgan | Following a complicated fourth quarter last year, world markets have recovered strongly so far in 2019.
However, despite the strong returns, corporate profits are under pressure. The growth in profits has only made a modest positive contribution to returns in the US and UK, while they have been a burden in Japan, Europe and emerging markets. On the other hand, the evolution of valuations has been responsible for the majority of returns.
Analysts still expect an elevated growth of 10% for corporate profits at a global level in 2020, despite the complications at the macro level. With valuations in many markets which already reflect greater expectations of central bank flexibility, downward revisions in profit expectations could be a risk for equity market returns over the next few months.
