Earnings Weakness Not 'Panic Moment' for Investors, L&G Says

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Bloomberg Jul 24 07:26 · 55.5k Views

Sonja Laud, chief investment officer at Legal & General Investment Management, says weak earnings for a number of companies in both the US and Europe does not represent a "panic moment." Speaking on Bloomberg Television, Laud says the market reaction is "quite natural to what should have been anticipated," adding that analysts and investors will look at the "repeatable and sustainable earnings profile" of most of these corporations.

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Transcript

  • 00:00 Earnings on both sides of the Atlantic are not looking good.
  • 00:02 Is this a panic moment for equity investors?
  • 00:06 I wouldn't call it a panic moment if you consider that
  • 00:09 the, the weakness today is against the backdrop of of course, a very long period of incredible strength across equities globally actually.
  • 00:17 And you've, you've picked it up right.
  • 00:18 There's that there's a number of global themes that are impacting earnings and they shouldn't be surprising if you, if you start with what's weighing on the Kakaran today,
  • 00:25 it's the China story.
  • 00:27 Now Chinese economic data is not bad since yesterday, there has been trouble for quite some time.
  • 00:32 So to assume that the Chinese consumer might not necessarily continue with their incredible support for luxury goods, I don't think it's surprising.
  • 00:40 What you're seeing today is finally the evidence in numbers.
  • 00:43 So the market reaction is actually quite natural to what should have been anticipated
  • 00:47 in that context.
  • 00:48 Now the mixed picture across the banks, again, we should be very careful to generalize because of course the business set up the business mix of the
  • 00:55 companies that reported this morning is very different.
  • 00:58 So what is the strength potentially in Spain is very different to what drives storage reviews.
  • 01:02 Clearly the, the exceptional charge they had to take.
  • 01:04 It's not something we expect to be repeated next time.
  • 01:08 But again, you, you had the Deutsche Bank chart on earlier.
  • 01:10 You look at the one year
  • 01:12 performance of, of the of the company and it's, it's a set back now.
  • 01:15 It might well be, it's the, it's the lack of, of a further share buyback.
  • 01:19 You know, there might be immediate triggers on the day, but
  • 01:21 analysts and, and investors very clearly will look at the
  • 01:24 repeatable and sustainable earnings profile of most of these companies.
  • 01:28 But don't ignore the macro factors.
  • 01:30 And coming back to the Mac seven, I read a wonderful headline this morning, the magnificent correction.
  • 01:35 And we shouldn't dismiss it, right?
  • 01:36 Because we've been looking at these companies and they've been driving the vast, vast majority
  • 01:42 of the of the index level.
  • 01:44 But the expectations were for roughly 8038% of earnings growth.
  • 01:48 Yeah.
  • 01:48 And you wonder how sustainable is it?
  • 01:50 Are we ending up at 30?
  • 01:51 It's still a formidable number, but you you need an A readjustment process for what has been an exceptional journey for these companies.