The eurozone sovereign debt crisis has dampened confidence and as a result, leading indicators are pointing towards deterioration in economic growth. So what does this mean for fundamental valuations and the outlook for corporate earnings?
Net earnings revisions have been negative for several months with the key driver of this deterioration coming from revenues; a clear sign that the global economic slowdown is starting to bite. Not surprisingly, the downturn in earnings momentum has largely been driven by a slowdown in the cyclical sectors with some defensive sectors continuing to see positive revisions. However, current expectations of 11% earnings growth next year look optimistic and the eventual outcome will depend upon whether slowing economic growth turns into a recession. Most economists still appear to favour modes...
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