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2026-10-13 13:05:01 G Sachs published a research report stating that the recent weakness in equity markets coincided with broad P/E valuation compression across markets over the past month. The largest valuation declines were mainly driven by strong earnings from tech stocks, particularly beneficiaries of artificial intelligence capital expenditure, although sectors related to artificial intelligence applications and adoption also underwent re-rating. Energy prices and political uncertainty also added pressure. European banks best reflected this divergence, with earnings and dividends remaining supportive, but P/E multiples facing notable pressure. The bank noted that the options market continues to price in significant divergence for the earnings season, with implied correlation across most equity markets at the lowest decile. The US market is particularly low relative to its own history and other markets, helping to contain index volatility amid elevated macro risks. Over the past three months, MSCI World Index 2026 EPS forecasts rose 7%, driven by the US and Asia, while Europe's strength was concentrated in fewer sectors. Beneficiaries of artificial intelligence infrastructure are expected to contribute more than half of the related growth, and tech hardware remains supported. Consensus forecasts expect EPS growth of 23% YoY in 2H26, or 16% excluding commodities. In its latest allocation update, the bank upgraded its three-month outlook to Overweight equities and Underweight credit, while shifting its 12-month outlook to Overweight bonds and tactically increasing cash holdings. The bank believes earnings growth continues to support equities, while the recent valuation reset has improved the asymmetric setup entering the 3Q earnings season. As inflation normalizes and central bank pricing turns less hawkish, the medium-term value of long-duration bonds is becoming increasingly attractive, although tactically the bank still prefers shorter-duration fixed income instruments through an Overweight cash position. On equities, the bank maintains an Overweight stance on the US and Asia and an Underweight stance on Europe. It also continues to favor global tech stocks alongside a barbell allocation of selected stocks featuring rate sensitivity, high dividend yields, low volatility and bond proxy characteristics that could benefit from eventual rate easing. (da/ad)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |