Stock valuations offer good support for global equities, even as earnings momentum begins to flag, suggests BCA Research in a new research note.

“The unfolding global economic slowdown indicates that the robust earnings growth of the past three years will soon fade,” BCA says. “Indeed, analyst earnings revisions are already declining and further cuts seem likely.”

“A deterioration in earnings momentum will restrain stocks, but is unlikely to derail the global equity advance unless the level of profits actually contracts,” BCA maintains. “That is not in the cards in a soft-landing scenario for the U.S. economy, which is our base case.”

“Moreover, the forward P/E ratio on global stocks is under 14, a nearly 20% discount to the post-1990 average, indicating equities have a cushion to absorb a slowdown in earnings growth,” it concludes.