Stocks have surged globally this year as the specter of macro risks receded, but next year, shares will need to work for their gains, Nomura said.
"The gradual decline of macro/systemic risks (and of investor risk aversion) since mid-2012 has enabled equity managers to capture substantial value as price-to-earnings-ratio multiples expanded. But much of that process has now played out," Nomura said in a report on its outlook for 2014.
"From here, equities will increasingly require more of a straightforward growth rationale for upside, rather than systemic-risk compression."
It advises honing in on "robust earnings stories," rather than worrying about the "worst-case permutations" of macro risk events, noting several risk episodes this year, such as the Cyprus banking failure and the U.S. government shutdown, passed without too much market drama. "Very few developments from here are likely to rise to the level of true systemic contagion threats."
So where should investors hunt for the earnings?
Not the U.S., Nomura said. While consensus expectations are for S&P 500 earnings per share, or EPS, to rise 10.9 percent to US$120.40 in 2014, "this outlook strikes us as somewhat optimistic," the report said, noting it assumes U.S. sales growth will rise more than economic growth and contains an "overly generous" expectation margins will continue to expand in every sector.
"U.S. businesses already implemented any 'low-hanging' cost reductions during their aggressive global financial crisis-era belt-tightening – leaving fewer internal efficiencies to be realized now," it said, adding capital and labor costs are also set to rise, constraining margin upside.
Nomura expects the S&P 500's EPS will rise 5.6 percent to $112.50, compared with its 2013 forecast of $106.50. It sets an end-2014 S&P 500 target of 1925 and rates the U.S. market at Underweight. The index closed Tuesday down 0.2 percent at 1767.69.
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Nomura is positive on Japan's earnings, rating the market Overweight and expecting its recurring earnings to grow 28 percent through the March 31 end of its fiscal year, before settling at a more mundane 10 percent growth in the following fiscal year. It forecasts a calendar 2014 EPS growth of 19 percent and sets an end-2014 Topix index target of 1500. The Topix is currently trading around 1205.
Developed continental Europe is also in the early stages of a margin and earnings rebound, Nomura said, rating it Overweight. It expects pan-European corporate earnings will rise 14 percent next year.
Asia ex-Japan is Nomura's only emerging market Overweight, but it noted it expects the region's forecast 15 percent EPS growth in 2014 will be concentrated in the export-intensive segments exposed to developed markets. Nomura has a cautious view of Chinese economic growth and it expects the U.S. dollar to appreciate, leading it to rate developed Asia-ex Japan, or Australia, Hong Kong and Singapore Underweight.
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"The improving global trend growth (led by developed markets) is likely to be the greatest driver of Asia-Pacific ex-Japan earnings and equity prices over the next 12-24 months. This should flow through not only into regional consumption demand but also capex," with cyclical countries and sectors set to benefit, it said.
It expects Asia-Pacific ex-Japan to see 12 percent earnings growth in 2014 as a whole, with emerging-market Asia's earnings to rise 15 percent, while developed Asia ex-Japan, will see only 9 percent growth.
It is Underweight on Latin America and the Eastern Europe, Middle East and Africa, or EEMEA, regions. It only expects 5 percent earnings growth in the EEMEA region and 11 percent from Latin America.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1