In One Chart: Why strong earnings aren’t just a U.S. story—in one chart

Wall Street has hit a series of records in recent weeks, and one of the primary drivers of that has been an improvement in corporate earnings. However, this is hardly a U.S.-only story.

Corporate earnings have been improving globally, and some of the fastest growth has come from international companies, as seen in the following chart from BlackRock, which looks at U.S. growth against the globe, excluding the U.S.

Corporate earnings for non-U. S. companies had been lagging behind in recent years, hurt by excess capacity, weak commodity prices, and a strong U.S. dollar, but those trends have sharply reversed in 2017.

“Now the situation is different, thanks to the most synchronized global expansion in the post-crisis period,” said Richard Turnill, BlackRock’s global chief investment strategist. “The earnings pick-up unfolded in Europe and Japan this year despite the drag of stronger currencies on exporters. Both regions are expected to see earnings growth outpacing that in the U.S. for 2017.”

Turnill added that “We think this trend has more room to run, in part because we see this year’s euro and yen strength slowly reversing.”

The earnings recovery has helped to fuel equity gains around the world this year. The S&P 500 index SPX, +0.10%  is up about 15.5% thus far this year, while Hong Kong’s Hang Seng Index HSI, +0.21%  is up 32.6%. Europe’s Stoxx Europe 600 Index SXXP, -0.66% has gained 6.8% in 2017, and an exchange-traded fund that tracks emerging markets has risen 24.4%.

The strength has been so vast, according to Torsten Sløk, Deutsche Bank’s chief international economist, that “the world economy has never been in better shape.” In late October, he noted that fewer than 10 countries were currently in a recession, “the lowest number…ever.”

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