The next leg of the bull market in global equities will be driven by earnings, says BlackRock’s Richard Turnill.
The firm's head of global equities says while markets have marched smartly since the spring, valuations are still low compared to a year ago and remain attractive compared to other asset classes.
"Progress since April arose as investors re-adjusted from a highly risk averse attitude, to a more normal stance," says Turnill.
"We believe the next leg of the bull market will be driven by earnings. The earnings cycle has already bottomed out but expectations of earnings growth remain stubbornly pessimistic. So we should expect positive earnings surprises right across the market."
Turnill says in developed markets, cyclical companies such as financials still offer value but he is increasingly balancing these holdings with exposure to deep value stocks with strong earnings streams, good cash flow, and attractive dividend yields.
He says yields of 6-7% a year are available from telecoms, tobacco, healthcare or media companies, and is confident this yield will be maintained.
"In developing markets companies will benefit from a continuously high level of liquidity - the amount of cash available for investment," says Turnill.
"We expect interest rates to remain low globally until 2010/2011, maintaining a high level of liquidity in economies, and reducing the attractions of cash and bonds. In these markets the consumer facing companies, property and even investment banks are attractive."
