Welcome to Thoughts on the market.

I'm Andrew Sheets, Chief Cross Asset Strategy from Morgan Stanley.

Along with my colleagues providing a variety of perspectives,

I'll be talking about trends across the global

investment landscape and how we put those different ideas together. It's Friday,

January 17th at 2 p.m. in London. There were many reasons that global stock prices rose considerably in

2019 but one of those reasons wasn't because companies managed to make more money.

While the numbers are still coming in US stocks probably saw roughly no earnings growth in 2019 relative to the year before.

Earnings outside the U.S. did even worse, seeing an outright decline.

It's easy to dismiss the divergence of higher prices and weaker earnings is simply a function of the world that we now live in,

where low interest rates and central bank bond purchases mean that fundamentals simply don't matter.

Over the last decade, a period defined by modest growth, low interest rates,

and Central Bank support, earnings have been important drivers of ultimate performance.

Over the last 10 years from January 1st, 2010, U.S. stock markets returned 256 percent.

Emerging markets returned just 49 percent.

This outperformance was dramatic, and it was persistent.

And while stock markets in Europe and Japan

did better than those in emerging markets they also trailed the US by a significant margin and

what was behind this US out, materially better earnings growth.

For the same 10 years from January 1st, 2010, earnings for the SMP 500 rose 169%.

In contrast, earnings in emerging markets grew just 28%.

This trend is repeated at the sector level as well.

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