An important week for earnings lies ahead, with the focus on updates from the tech space, which has already laid off thousands of workers.
Among those who didn’t expect good news in the earnings reporting system was Mike Wilson, Morgan Stanley’s director of US equity strategy, who was in our article. call of the day says that investors need to beware of the “bear market mirror.”
A pretty upbeat start to the year for stocks — S&P 500
has gained more than 3% this year and the Ark Innovation ETF is defeated
rose 17% – did not appeal to him. “Suffice it to say, we’re not interested in the recent recovery because our work and processes have convincingly reduced earnings,” Wilson said.
He noted that the early 2023 rally has been led by “low-quality and heavily sold stocks” and a sharp shift to cyclical rather than defensive. “In particular, this cyclical rotation is convincing investors that they are missing a bottom and must reposition,” he told clients in a note on Sunday.
But he cautions that bear markets can mislead a lot of investors before all is said and done, and that they must continue to trust their own process and ignore the noise. “The end of the bear market is always the hardest, and we were on high alert for such fakes, such as the October-December rally that we had,” Wilson said. predicted and traded”.
“After a challenging 2022, many investors are still fundamentally bearish, but question whether negative fundamentals have been priced into the stock,” he said. “Our view is unchanged as we expect the earnings path in the US to disappoint both current valuation and consensus expectations.”
One area that worries him is that the gap between the bank’s earnings outlook and future estimates is “unprecedentedly wide. The last two times our model was much below consensus, the S&P 500 fell 34% and 49%,” he said.
What Wilson expects is an “imminent” earnings recession and subsequent erosion of margins. That will happen when costs grow faster than revenues and companies’ revenues unexpectedly slow, he said.
And while we’re not officially in a recession yet, the consequences for companies are already there — falling sales, bloated inventories and less productive employees. .
All that said, Wilson said that they “welcome the sentiment and positioning of the past few weeks as a necessary condition for the final phase of the bear market to take place.”
The chief equity strategist, who correctly predicted the direction of the 2022 stock market sell-off, warned earlier in the year that a recessionary shock this year could cause the market to drop another 22%. When it comes to Wall Street Predictions for this year’s S&P 500Wilson is on the lower side on expectations the index will end at 3,900.
US Treasury at ‘key point’: Stock, bond correlations change as fixed-income market warns of recession
higher, while treasury bonds
is also inching up, and the dollar
is the apartment. Much of Asia closed — Chinese markets will be closed for the entire week for the Lunar New Year holiday. Nikkei 225
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up 17% after the water treatment company received a $7.5 billion offer from rival Xylem
shares fell 9.2%.
Get ready for some of the big tech names to report this week — Microsoft
and Texas Instruments on Tuesday, Tesla
on Wednesday and Intel
on Thursday. GE
Johnson & Johnson
will also report.
Genius Group, Singapore-based educational technology company with the stock is up 800% this yearset guidance for 2023, saying it sees 27% higher revenue than 2022 and 30% higher student numbers.
Earning tracking: Microsoft, Tesla and Intel are about to face skeptics
added to a wave of tech layoffs, with the music streaming company announcing plans to cut 6% of its workforce.
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