A new round of US stock financial report season is coming soon, and Wall Street is generally pessimistic about its performance; investors also believe that special attention should be paid to Apple 's performance and use it as a weather vane for global economic conditions.
This week, many companies including JPMorgan Chase , Citi , Wells Fargo will release their third-quarter financial results. With the continued rise in costs, rising interest rates squeeze demand, and the dollar strengthens to cut overseas revenue, investors will look for any clues about business operations.
This year, the S&P 500 index has fallen by more than 24%, possibly setting its worst annual performance since the 2008 financial crisis.
According to the media cited the latest survey by MLIV Pulse, more than 60% of the 724 respondents said that this round of financial report season will drive the S&P 500 further downward. After the plunge last Friday completely shattered hope, it means the stock market's downturn shows no sign of an end.
About 70% of respondents expect the S&P 500's P/E ratio to fall to a 14-fold low in 2020, and 25% of respondents expect the ratio to a 10-fold low in 2008. The index currently has an expected P/E ratio of about 16 times, which is lower than the average in the past 10 years. About half of the respondents expect U.S. stock valuations to fall further.
Wall Street is now worried that as inflation remains high, the already plunging stock markets still have not fully priced all the risks brought about by the radical tightening policy of the central bank. As the Federal Reserve insists on hiring large-scale hikes in , the economic outlook cannot improve soon, and it may have an impact on economic growth and corporate profits in this process. Last Friday's non-farm employment data showed that the U.S. labor market remained strong, increasing the possibility that the Fed would raise interest rates again next month.
Wall Street's pessimistic expectations
Wall Street's attitude towards the performance of this round of financial report season is generally pessimistic. According to
FactSet, analysts lowered their third-quarter earnings forecasts by 6.8%, the biggest drop in expectations for the reporting period since the second quarter of 2020. Analysts also lowered their expectations for the fourth quarter and 2023 performance of U.S. stocks.
Citi strategists expect global earnings to fall by 5% year-on-year in 2023, consistent with the lower-trend levels of global economic growth and inflation. Citi's downgrade of the United States, Europe and the world exceeded the upgrade, with the largest downgrade of the United States.
Bank of America strategists expect European stock markets to fall by 20% by mid-2023; Goldman Sachs strategists said that Asian stock markets except Japan may experience more earnings cuts due to weak macroeconomic and industrial data. UBS U.S. stock strategist Nadia Lovell also holds the same attitude.
respondents also expect inflation and recession to be the main topics of this quarter's earnings call. Only 11% of respondents believe that the CEO would mention the word "confidence" to highlight a bleak economic outlook.
According to media reports, Peter Garnry, head of stock strategy at Saxo Bank , said:
's third-quarter financial report will be disappointing, and analysts expect obvious downside risks. The main risk faced by the third-quarter financial report is that the cost of living crisis has affected consumer goods demand and rising wages have eroded corporate profits.
Although pessimistic emotions are everywhere, there may still be room for surprises beyond expectations for future financial performance. Strategists such as Emmanuel Cau of Barclays said that the financial results should be unlikely to be a “disaster” as nominal growth rates remain high, but they also expressed doubts about the constructive prospects of profitability.
According to media reports, Madison Faller, a global strategist at JPMorgan Private Bank, believes that as valuation expectations fall, investors will be eager to bet more that the Fed will suspend the interest rate hike cycle.
Apple is the focus of this round of financial report season
Investors generally believe that special attention should be paid to Apple's performance and use it as a weather vane for the global economic situation. Apple will announce its financial report on October 27.
For stocks that need attention in the coming weeks, media quoted MLIV Pulse surveys that 60% of respondents believe that Apple is crucial. Apple is the most weighted company in the S&P 500, and it is believed that it will provide clues to changes in a range of economic indicators, such as consumer demand, supply chains, the impact of the surge in the dollar, and rising interest rates.
JPMorgan ranked second with 25% attention, and Microsoft and Walmart also gained considerable attention.
In addition, in this severe macroeconomic environment, nearly 40% of respondents tend to invest more in value stocks, and 23% of respondents tend to invest in growth stocks . As interest rates rise, the earnings outlook for growth stocks becomes more vulnerable.
However, 37% of respondents had no choice for both categories, which also reflects the view of Citi Quantitative Strategists that the stock market has "significantly turned defensive" and has just begun to reflect the risk of a recession.
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