This wave of rebound in the US stock market has come to an end?
On Monday, August 8, strategists from Morgan Stanley and Goldman Sachs said that the bleak profit outlook for is significantly diverging from the recent stock market rebound.
Morgan Stanley's Michael Wilson and Goldman Sachs' David Kostin team both expect profit margins to shrink next year given the ongoing cost pressure. Wilson has always been one of the famous "big short sellers" in the US stock market. He said that the "most exciting part" of the US stock market rebound has ended.
Currently, the second quarter performance of large-cap American companies has basically been released, which is better than market expectations overall. This also drove the sharp rise of US stocks in July, with major stock indexes recording the largest single-month increase since 2020 in July, especially after the Federal Reserve raised interest rates by 75 basis points. In addition to the gratifying performance, investors bet that profit margins of U.S. stock companies can withstand inflationary pressures. In addition, amid weak economic data, the market expects the Federal Reserve to gradually turn dovish.
However, Wall Street strategy analysts are not so sure about the future of US stocks. Morgan Stanley's Wilson team said in a report released on Monday:
Although end-users' prices are still rising rapidly, the costs of manufacturers are rising at twice the rate. We believe that the further expansion of profit margins of US listed companies and meeting the current market expectations for 2023 is not realistic, because costs are still rising, while demand is declining.
Goldman Sachs Kostin's team's views are similar. They believe that even if revenue continues to grow, higher input costs will weaken profit margins next year, thus causing a slowdown in growth. They now expect that by 2023, the net profit margins of US listed companies will fall by 25 basis points, and each industry will shrink, with the materials, energy and healthcare industries being the most severe.
Morgan Stanley's Wilson team called the current rebound in US stocks a "bear market rebound." He said that although he believes inflation has peaked and “may even fall faster than the market currently expects”, this still does not bode well for the stock market, because it will reduce operating leverage and drag down company earnings:
We believe that it is too early to say that it is clear that the U.S. stock trend is just because inflation has peaked. Starting from September, a new round of declines may begin to occur in the U.S. stock market.
Wall Street has been warning recently
Last week, Wall Street investment banks such as Goldman Sachs and Bernstein once again warned that as macroeconomic data continues to deteriorate and corporate performance expectations have been significantly lowered, The recent strong rebound of US stocks may be just a flash in the pan and will not continue.
Analysts represented by Goldman Sachs strategist Cecilia Mariotti said:
market positions may further increase in the short term, but there is no obvious sign that there is a positive change in the macroeconomic momentum. A brief strong rebound may actually increase the risk of a market falling again, rather than heralding the end of a bear market.
According to Goldman Sachs strategists, as investors flock to the stock market again in recent weeks, market positions have improved from the negative levels in June, and volatility in asset allocation may drive stocks up in the short term. However, it believes that if does not have a fundamental reversal upward trend, the technical rebound will only be another bear market rebound, and the decline will be even faster than the rise.
Ultimately, Goldman Sachs "doesn't believe we have crossed the real trough" and said that "the future trend may rely more on macroeconomic data."
Similarly, Bernstein holds the same view, with its strategists Sarah McCarthy and Mark Diver saying in a note Thursday that the cycle of lowering earnings expectations has just begun as equity funds flow out.
Although investors stopped buying stocks in the second quarter, stock funds have not seen a reversal of the "huge" outflow of up to $200 billion in the first quarter. We expect the stock market to fall again in the short term.
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This article does not constitute personal investment advice, nor does it take into account the special investment goals, financial situation or needs of individual users.Users should consider whether any opinions, opinions or conclusions in this article meet their specific circumstances. The market is risky, so you need to be cautious when investing. Please make independent judgments and decisions.
This wave of rebound in the US stock market has come to an end?
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