The alarm bell for the US economic recession is ringing step by step, and the new round of US stock financial report season that will start in the near future may be the best manifestation. After all, investors are not so optimistic about the third-quarter financial report.
MLIV Of the 724 respondents surveyed by Pulse, more than 60% said the financial report season would push down the S&P 500 index . This means that the stock market's downturn is not over yet.
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. Strategists from the two major banks,
Goldman Sachs and Morgan Stanley , made it clear that companies will usher in a difficult financial report season as demand slows down and soars in costs accumulate. Peter Garnry, head of stock strategy at Saxo Bank , also said that the 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.
No matter how you look at it, the upcoming financial report season for the US stock market is shrouded in sorrow. The reasons behind the fact that the bulls are not optimistic about the new quarter financial report of US stocks are largely attributed to the following three major reasons:
First, the US economic recession is irreversible.
In the first three quarters of 2022, many indicators of the US economy showed a significant decline. Under the influence of Federal accelerated tightening of monetary policy, the US GDP has grown negatively for two consecutive quarters, down 1.6% and 0.6% month-on-month in the first and second quarters, respectively, falling into a "technical recession".
JPMorgan CEO Jamie Dimon Recently issued a warning that the US economy may fall into recession within 6 to 9 months, and the situation is very serious. The latest report released by the International Monetary Organization (IMF) also significantly lowered the U.S. economic growth forecast this year by 0.7 percentage points to 1.6%.
According to a survey by Mass Mutual, more than half of the Americans surveyed (56%) believe that the United States has fallen into a recession.
The second is the impact of the strong US dollar.
USD rise is a big negative for technology companies with a large number of multinational businesses. When US companies’ overseas revenues return to the United States, the appreciation of the US dollar may lead to serious foreign exchange losses.
On the one hand, the strong US dollar makes the goods exported by the United States higher and loses the price advantage; on the other hand, it will also reduce the sales of American companies. Credit Suisse estimates show that every 8% to 10% appreciation of the US dollar will lead to a 1% decline in profits from US companies. In the second quarter financial report of US stocks, Johnson & Johnson expects the impact of the appreciation of the US dollar on its sales this year to reach US$4 billion; Apple warned that exchange rate fluctuations will lead to a 6% reduction in revenue this quarter.
Third, the vanguard's expectations are not good.
According to convention, bank stocks are the "vanguard" in releasing quarterly reports, but obviously the market is not optimistic about them. According to IBES data from Refinitiv , analysts expect profits of JPMorgan , Citi , Bank of America and Wells Fargo in the third quarter will fall by 24%, 32%, 14% and 17%, respectively.
In addition, Goldman Sachs expects its third-quarter profit to plummet 46% in its October 8 report, while rival Morgan Stanley's profit is expected to fall 28%. Since the beginning of this year, the stock prices of Goldman Sachs and Morgan Stanley have fallen by about 20%.
It is worth noting that the banking sector index KBW Bank Index has fallen by about 26% since January.
Of course, there are positive voices when there are bad voices. Bloomberg intelligence analysts said that the third-quarter financial report may exceed expectations. Sarah McCarthy and Mark Diver, investment bank Sanford C. Bernstein strategists, said U.S. and European stock markets still have room for further downside, as earnings expectations and the amount of funds flowing out of the stock market have not yet bottomed out.
So, how is the performance of the third-quarter financial report of the US stock market? Is it good or sad? Let's wait and see!
