Ultimately, we believe corporate earnings are the primary driver of stockmarket returns. At just over 18x earnings, today's US equity valuations are modestly above historical averages.
However, earnings growth within the market has varied dramatically over the past several years, with some sectors continuing to experience greater headwinds. In fact, earnings expectations have come in dramatically since the beginning of the year. At the end of 2015, consensus expectations for 2016 EPS growth was over 7%, but this has now been reduced to roughly zero. Clearly, 2016 has been more challenging than the market has previously expected, but the reality is investor expectations have also been dramatically reset. We are finding opportunities in different parts of the mar...
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