Inflation remains frustratingly elevated. Recession talk still dominates Wall Street despite a surprisingly strong This summer jobs report. And 2nd quarter earnings season continues to be not great.
But all that isn’t stopping top JP Morgan strategist Mislav Matejka from being bullish on stocks.
“We feel that risk reward for equities isn’t all bad once we transfer to year-finish,” Matejka stated inside a new note to clients on Monday. “Actually, we contended we have joined the phase in which the weak dataflow is visible nearly as good, resulting in a [Given] policy pivot, and also the activity slowdown might end up being less deep than feared.”
Matejka listed 10 reasons supporting his call:
- 1. Valuations appear attractive, in absolute terms and when compared with fixed earnings.
- 2. You will find elevated cash levels among institutional investors, plus an appetite to start putting funds to operate.
- 3. Investor sentiment is presently too bearish (frequently considered bullish indicator for stocks).
- 4. Fed hawkishness has likely peaked.
- 5. The U.S. dollar has likely peaked for that year.
- 6. The economical slowdown is not showing indications of an awful recession.
- 7. Greater earnings consumers remain resilient.
- 8. Earnings estimates in the pub unlikely to become marked lower strongly.
- 9. Excess savings built throughout the pandemic continue to be supplying a cushion to consumer spending.
- 10. The worldwide economy will unlikely visit a synchronized downturn.
Matejka’s view is not shared by a number of of his well-known peers in the pub.
Morgan Stanley’s Mike Wilson told Yahoo Finance Live the overall conditions – varying from slowing corporate earnings growth to rising rates to bruising inflation – have established yourself for that S&P 500 to get the June lows sometime through the fall.
Wilson is constantly on the guide clients into more defensive regions of the marketplace and is not against holding more money than usual. When the sell-off happens, based on Wilson, we’re able to witness the beginning of a brand new bull market in 2023.
At Goldman Sachs, David Kostin required a chisel to his 2023 profit estimate. Kostin now sees 2023 EPS for that S&P 500 growing only 3% (6% formerly), below analyst forecasts of sevenPercent. The downward revision reflect’s Kostin’s look at ongoing input cost pressures on companies.
Kostin listed 67 companies as “vulnerable” to downward profit revisions, including big names for example T-Mobile, Lockheed Martin, Honeywell, Ea, and Yummy! Brands.
“We predict limited upside towards the S&P 500 through year-finish, given our economists’ above-consensus inflation forecast, the chance for greater real yields, and also the constraints on Given policy in the boost in stock values which has eased financial conditions since mid-June,” described Kostin.