{"id":15563,"date":"2016-10-25T23:00:00","date_gmt":"2016-10-25T22:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/etfworld.co.uk\/index.php\/2016\/10\/25\/wisdomtree-where-is-earnings-growth-in-the-eurozone\/"},"modified":"2016-10-25T23:00:00","modified_gmt":"2016-10-25T22:00:00","slug":"wisdomtree-where-is-earnings-growth-in-the-eurozone","status":"publish","type":"post","link":"https:\/\/www.etfworld.com\/co.uk\/wisdomtree-where-is-earnings-growth-in-the-eurozone\/","title":{"rendered":"WisdomTree: Where Is Earnings Growth in the Eurozone?"},"content":{"rendered":"

There are several reasons to be optimistic about the prospects for Eurozone equity markets: market multiples are low, bond yields<\/span><\/a> are low (and even negative out to 10-year maturities<\/span><\/a> in Germany) and earnings trends are looking more positive……..<\/p>\n

<\/p>\n

\n

That last item is especially important. Simply looking at the earnings for broad market indices like the MSCI EMU Index may give a distorted view of what is happening across a number of sectors in Europe. Looking at the earnings figures for the MSCI EMU Index, one can see earnings declining over the last five years at a rate of -2.1% per year.<\/p>\n

But half the sectors in the market (typically the export-oriented sectors) are delivering earnings growth that ranges from 2.6% per year to 4.5% per year and on average is 3.7% per year. These export-oriented sectors are Consumer Discretionary, Industrials, Health Care, Information Technology, and Consumer Staples. These sectors constitute roughly 57% of the weight of the MSCI EMU Index.<\/p>\n

On the other hand, there are sectors (the other 43% of the MSCI EMU Index) in which earnings have collapsed: Financials, Energy, Materials, Utilities, and Telecommunications. The Financials sector was the biggest of these from a weighting perspective.<\/p>\n

Earnings Growth Sectors versus Earnings Contracting Sectors<\/span><\/strong>
<\/span>\"https:\/\/www.wisdomtree.com\/blog\/wp-content\/uploads\/percent-of-weight-in-index.gif\"
<\/span><\/p>\n

Focusing on Eurozone Earnings Growth<\/strong><\/p>\n

The WisdomTree Europe Hedged Equity Index (“Eurozone Exporters”), which is composed of multinationals within the Eurozone, is achieving earnings growth largely because it is under-weight these predominantly domestic sectors. These sectors are exposed to a more challenged earnings environment whilst the index is tilted towards sectors where. earnings have been growing in the Eurozone. Compared to the 57% of the MSCI EMU Index allocated to those sectors with positive earnings growth, the WisdomTree Europe Hedged Equity Index currently has 72% allocated to these sectors. Notably, the index is underweight in Energy and Financials and this has helped introduce a quality bias to the portfolio.<\/p>\n

For those who believe valuations are low in the Eurozone, the large capitalisation multinationals with an export tilt represent one segment of the market with a better earnings growth environment. This strategy is currently represented by the WisdomTree Europe Hedged Equity Index.
 
Tilting Toward Positive Earnings Growth Sectors<\/strong>
<\/span>\"https:\/\/www.wisdomtree.com\/blog\/wp-content\/uploads\/earnings-per-share-growth.gif\"
<\/span><\/p>\n

The sector tilt of the Eurozone exporters, with its focus on positive earnings growth and above average sales growth is apparent on both a one year and three-year time horizon. Compared to MSCI EMU, the WisdomTree strategy is usefully positioned to focus on a higher quality sector mix and stronger fundamentals.<\/p>\n\n\n\n\n\n\n
<\/span><\/strong><\/td>\nSales Growth: 1 Year<\/span><\/strong><\/td>\nEarnings Per Share Growth: 1 Year<\/span><\/strong><\/td>\nSales Growth: 3 Year<\/span><\/strong><\/td>\nEarnings Per Share Growth: 3 Year<\/span><\/strong><\/td>\n <\/td>\n<\/tr>\n
 <\/td>\n<\/tr>\n
MSCI EMU<\/span><\/strong><\/td>\n5.6%<\/span><\/td>\n13.4%<\/span><\/td>\n1.9%<\/span><\/td>\n10.0%<\/span><\/td>\n <\/td>\n<\/tr>\n
Eurozone Exporters<\/span><\/strong><\/td>\n10.1%<\/span><\/td>\n14.8%<\/span><\/td>\n4.7%<\/span><\/td>\n10.3%<\/span><\/td>\n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/span>Source: Bloomberg as of 28\/9\/16. Past performance is not indicative results. You cannot invest directly in an index. <\/span><\/p>\n

Source: ETFWorld.co.uk<\/p>\n","protected":false},"excerpt":{"rendered":"

There are several reasons to be optimistic about the prospects for Eurozone equity markets: market multiples are low, bond yields are low (and even negative out to 10-year maturities in Germany) and earnings trends are looking more positive……..<\/p>\n","protected":false},"author":3,"featured_media":17724,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[12],"tags":[148],"class_list":["post-15563","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-etf-analysis","tag-wisdom-tree-europe-boost-etp"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/posts\/15563","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/comments?post=15563"}],"version-history":[{"count":0,"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/posts\/15563\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/media\/17724"}],"wp:attachment":[{"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/media?parent=15563"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/categories?post=15563"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.etfworld.com\/co.uk\/wp-json\/wp\/v2\/tags?post=15563"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}