Volatile Estimates in Europe by Jennifer Thomson, Gavekal Capital

Changes in sales and earnings estimates have historically ranked fairly high in our factor analysis– a methodology we employ to gauge which variables have the greatest influence on/ correlation with moves in the overall market.

Generally speaking, both variables have improved (albeit marginally) since March:

MSCI The World Index

Most of this improvement is the result of the more positive growth outlook for North American companies– and the dramatic turnaround in earnings estimates, in particular:

MSCI North America

Estimates for MSCI Pacific constituents have steadily improved as well– just not as sharply as those for their North American counterparts:

MSCI Pacific

In Europe, however, the trend toward a more positive outlook seems to have stalled and reversed as the change in both sales and earnings growth estimates has turned negative once again:

MSCI Europe

The recent moderation– following such a sharp improvement in estimates (on a three month basis)– suggests that MSCI Europe’s correction could continue quite a bit further: