Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 52
RHYTHMIC REASONING | TEMPO, TIMING AND TUNING
EQUITIES
Swanzy Quarshie
Nav Malik
Managing Director, Equities
Director, Equities Research Lead
Canada
U.S.
International
LatAm
10.7x
1-yr fwd P/E
17.4x
23x
15.6x
10-yr avg P/E
15.6x
19.4x
14.2x
11.5x
1-yr fwd ROE
12.8%
19.3%
12.5%
16.4%
1-yr fwd EPS growth
10.7%
8.6%
11.6%
7.6%
FY 3 mo EPS rev
6.0%
5.0%
1.3%
5.2%
10-yr EPS CAGR
6.6%
8.0%
3.1%
4.9%
Source: Bloomberg Finance L.P., Scotia Wealth Management
KEY CONCLUSIONS
•
•
•
Despite significant headwinds in 2025, earnings growth
continued a strong trajectory.
Valuations in most markets are at a premium, presenting
some downside risk if high 2026 growth expectations do not
materialize.
While caution is warranted given valuations and continued
geopolitical and economic uncertainty, we see many regions
benefitting from key secular growth themes.
BEYOND THE HORIZON: WHAT WILL DRIVE EQUITY MARKETS IN
2026
Equity markets have demonstrated resilience amidst a complex
environment of persistent inflation, shifting central bank policies,
and continued geopolitical tensions. Strong corporate earnings
growth, easing monetary policy, strength in certain commodities,
and supportive fiscal measures have driven equity returns over the
past year. While the U.S. market, particularly in technology and
growth sectors, has shown considerable strength, other markets
and sectors have also posted strong gains.
The outlook for 2026 suggests a continued positive trend
but potentially with heightened volatility, especially given high
current valuations. Geopolitical risks, particularly around trade
protectionism and security, remain a key factor impacting global
economic growth. However, the ability that companies have
already demonstrated to adapt to these uncertainties has led
to a positive outlook for corporate earnings growth next year.
Commodity price strength and supportive fiscal measures are also
expected to drive equity returns, and a gradual easing cycle by
the Federal Reserve should serve as a tailwind for valuations.
Consensus forecasts are expecting profit growth to accelerate
next year for North American and international benchmarks, with
double-digit earnings growth projected in 2026.
We continue to advocate for holding high quality companies
that can navigate the changing environment and are also
exposed to long term growth themes. While macroeconomic and
geopolitical risks remain prevalent, investors should continue to
prioritize companies that demonstrate resilience and adaptability.
In addition, secular themes, such as artificial intelligence, health
and wellness, energy transition, resource scarcity, protectionism,
and deglobalization should provide opportunities for long term
growth.
PERFORMANCE
Equity markets have enjoyed strong performance in 2025 after
tariff uncertainty failed to meaningfully impact the growth
trajectory of corporate earnings. Markets around the globe are
sitting at new highs post the Liberation Day lows in early April
driven by technology stocks and higher beta cyclicals. Year-todate performance has been led by LatAm and international
equities, followed by Canada and U.S. equities.
Fig 1: LatAm and international equities lead equity markets YTD
43.6%
26.6%
23.9%
14.8%
12.5%
8.1%
10.3%
7.0%
Q3 return
Canada
YTD return
U.S.
Latam
International
Source: Bloomberg Finance L.P., Scotia Wealth Management |
Data is total returns in CAD for Canada, USD for other markets.
Canadian equities as measured by the S&P/TSX Composite
Index led other regions in Q3 in local currency terms, but trail
LatAm and international equities YTD. Performance in Canada
YTD was led by the Materials (+79.4%), Financials (+22.5%), and
Technology
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