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Upgrades to consensus US 2024 GDP forecasts have continued on the back of stronger than expected high frequency economic data. This contrasts with downgrades to forecasts across most other major regions.
Progress on US disinflation has stalled. Another above expectation reading in March sparked concern over the extent to which the Fed can cut rates this year.
Growth has continued to outperform Value. Small cap has marginally outperformed large cap over three months but saw negative returns in January.
Growth sees a 5yr annualized return of 17.9% vs 10.7% for value.
Markets have continued to reassess the outlook for rates in 2024, pricing in a significantly shallower rate cutting cycle across the main developed markets. The US has seen a major reversal year to date.
Market expectations over the extent of US 2024 rate cuts have shifted dramatically from 150bps at the start of the year to just 25bps of cuts now currently priced in.
Europe ex UK and the US have seen the largest 12m forward PE re-rating since the market low in October 2023. All regions remain well below their peak levels, most notably the UK and China.
The recent rise in US bond yields has seen the US equity-risk premium (using the Fed Model valuation) decline to multi-decade lows.
Expectations remain high for a strong rebound in EPS growth this year across the regions. The US is expected to deliver EPS growth of 12.3% in 2024, just below the World ex US at 13.3%.
Despite the double-digit EPS growth forecasts for 2024, underlying 2024 EPS estimates have seen negative revisions since the start of the year.
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