Factor Performance Shifts Away From Sales and Earnings Focus– Except in Europe

Regular readers are aware that we keep track of the influence of fundamental and macro events on stocks by measuring the correlation between the factor in question (with the individual readings broken into deciles) and the market performance over various time periods.  And, for some time (see here), the most important factors have tended to be related to sales and earnings, whether it be the growth of those items or the estimates related to them.  The relative importance of these factors among stocks in the MSCI World has, however, waned somewhat recently:

MSCI World
image
image

The trend in MSCI North America equities is similar to that of the overall developed market index above:

image
image

And performance in MSCI Pacific stocks seems to be following the trend, even if to a lesser extent:

image
image

The importance of sales and earnings in equity performance in MSCI Europe, by contrast, remains elevated and has even grown with respect to one month changes in estimates, as well as EPS growth:

image
image

So what do estimates and growth look like for MSCI Europe right now?  The one-month change in earnings and sales estimates remains negative in every sector, while earnings are expected to grow about 10%, on average, over the next four years:

image
image

These lackluster projections and their influence on performance of European equities, combined with actual performance so far this year (see here), would seem to suggest a least a little misplaced enthusiasm for stocks in Europe.