Improving sentiment for U.S. stocks is running counter to deteriorating economic data and corporate earnings, Morgan Stanley strategist Michael Wilson argued.
U.S. equities bearish Wilson pointed to a sharp drop in leading indicators on Thursday. This will lead to a sharp decline in corporate profits, which will ultimately lead to a decline in US stocks, he said. He said recent optimism from the Federal Reserve’s hawkish reversal, China’s reopening and a weaker dollar has already been priced into stocks.
“The question is when will stock indices factor in the current deterioration in leading indicators and the eventual deterioration in hard data.
The S&P 500 index is up nearly 11% since mid-October. That looks expensive compared to historical averages, given months of lower earnings forecasts.
JPMorgan Chase & Co. strategist Mislav Mateika also cited corporate profits as a concern. The environment is expected to be particularly challenging this year as corporate pricing power begins to reverse and weaken.
We expect corporate pricing power to head into recession this year as demand slows and consumer oversavings dwindle. He argued that there would no longer be any “extra support” for corporate income as customers used up the savings they had accumulated during the coronavirus pandemic.
“Even if the company’s results in the fourth quarter of 2022 do not disappoint, we do not expect an upward revision to earnings per share guidance in the first half of 2023,” Matejka wrote in a note.
Original title:Morgan Stanley’s Wilson Says US Stocks Aren’t Pricing Weak Data、JPM Strategists See Company Pricing Power Surge Set to Reverse（抜粋）
