Earnings In The Spotlight

The reflation trade will continue for a few more months on Chinese fiscal/monetary stimulus and a more dovish Fed. Despite a slightly better-than-expected start to the earnings season, Q1 S&P 500 profits are set to fall for a fourth consecutive yoy decline. Ex-energy, things aren't so bleak. Domestically-focused companies will experience flat earnings and modestly-positive revenue growth in Q1. Although margins have almost certainly peaked, their decline will be drawn-out. Remain overweight Europe/Japan/China versus the S&P 500 (currency-hedged).