ING Investment Management has warned that US equities face headwinds from the rising value of the US dollar and falling oil prices in the coming earnings season.
Patrick Moonen, senior strategist at ING Investment Management, said the impact of these forces was showing in fourth quarter earnings and has hit growth estimates, reducing them to below 1%. Weak global demand would hit US equities, Moonen said, with 40% of the S&P 500’s earnings coming from overseas. At the same time, the dollar has appreciated against the euro and the yen, by 9% and 14% respectively. Moonen commented: “It should however be remembered that disappointing US earnings do not necessarily mean that the US market will underperform. The US does not have the same policy risks compared to the Eurozone and its economy is far more resilient than the rest of the world. It will nevertheless be an uphill struggle, especially if the Fed were to start tightening monetary policy later this year.” As a result, he said, attention in the global equity market would shift from the US to other regions.