INTERNATIONAL EARNINGS OUTLOOK IS IMPROVING Earnings are, of course, the bottom line, so when looking at an equity investment we certainly can’t ignore earnings. The U.S. has been the clear earnings leader relative to international for the past decade, but the tide has recently turned. International earnings slightly outgrew U.S. earnings in 2022, (7.7% vs. 5.4% based on the latest estimates) and we believe international earnings may hold up slightly better in 2023 than the U.S.—it may be a 1-0 game, (a pitcher’s duel for you baseball fans) but the U.S. is no longer the place to go for earnings growth.
As shown in Figure 1, international earnings have also been exhibiting better momentum recently. Estimates have risen steadily over the past three months, while earnings estimates in the U.S. have edged lower and are likely to come down further. A weaker U.S. dollar translating into more non-U.S. earnings is a big part of the story, but there are other factors at work here. More on that below.
