Many investors may regret that February has only 28 days. It proved to be a generous month, faithfully following up on January's lightning start and completely reversing, or even more than compensating, the losses suffered by many asset classes in December. This was true of virtually all instruments which are seen as riskier than government bonds: in other words, equities, corporate bonds and commodities. Gold and silver, two safe havens, consequently weakened. Many indices have then returned to the levels of last November or even October. This is remarkable given that analysts are continuing to revise down corporate earnings. For the S&P 500, the consensus now expects earnings growth of 4.5% for 2019 compared with the previous year. But at the beginning of the year the expectation was for 7.5% growth and in autumn almost 10%. For the first quarter, a year-over-year drop in profits is expected for the first time since 2016. Net results are expected to be down by 2.7%, despite sales growth of 5.2%. No wonder that there are isolated concerns about a profit recession. We assume that consensus earnings downgrades have not yet bottomed out. But we continue to expect earnings growth for the United States as well as in most other markets in 2019. The influence of a number of negative factors – the semiconductor cycle, energy prices and tax changes – which will weigh especially on S&P 500 first-quarter earnings, is likely to diminish in the course of the year. But we believe that equity markets have already factored in this improvement to a great extent. We therefore leave our price target to March 2020 for the S&P 500 at 2,850. The consensus forecast sees the index at over 3,000 points. However, in a year in which we expect volatile sideways movement from current levels, we want to reduce risk again, in good time.
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