After the worst first half of US stocks in decades, a major rebound last week sparked some optimism that the worst selling might be behind us – but not everyone is convinced. Perhaps unsurprisingly, market watchers are reluctant to describe a brutal sell-off, but there is one indicator that many strategists say is key: earnings reviews. Trevor Gretham, head of multiple assets at Royal London Asset Management, says a “earnings slump” is coming, which he expects “to last for a long time”. “Earnings are the next issue…This rally could go on for a little bit longer, but don’t think this is the end of the bear market,” CNBC’s “Squawk Box Europe” said on Monday. Morgan Stanley also closely monitors earnings reviews. European strategists at Morgan Stanley, led by Graham Secker, noted on Monday that “stock markets tend to fall two to three weeks before earnings drop, but the latter hasn’t turned negative yet.” On a separate note on US stocks, the bank noted that the bounce in the S&P500 index last week was due to rising valuations – an “extraordinary” phenomenon given the growing concern about earnings. “Lower yields and lower oil prices have lowered the Fed’s final interest rate. Whether this is bullish or bearish depends on one’s interpretation. Last week, the market took a bullish view that may last for a few more weeks before the reality of lower earnings arrives,” the analyst said. Strategist Michael Wilson: READ MORE As recession fears mount, UBS is going down the annals of history to predict what could happen.These global stocks look oversold – and analysts expect a rebound Goldman Sachs analysts reveal some of the most attractive stocks as recession fears mount. MSCI Europe is in later stages of downgrade, and the price drop from peak to trough continues to look very modest relative to previous recessions.This is due to earnings estimates that have continued to rise year-to-date despite the sharp drop in prices, Seker explained. Stock prices. “We don’t expect this divergence to last much longer, but we see a high chance that the flow of economic news will deteriorate over the next couple of months, which should put downward pressure on [gross domestic product] And the [earnings per share] Expectations,” he added. How low can earnings fall? In a note titled “Earnings: How Low Can They Fall?” “UBS also stresses the importance of earnings, although it takes a slightly more optimistic tone.” With S & P 500 P / E down [around] 6 times year-to-date, how much profit will fall is a major debate,” the bank’s strategists, led by Keith Parker, wrote last week. They added that the base scenario for the US is “slow growth but no recession.” The bank expects earnings per Capabilities (EPS) valued at $235.50 and $250 for the S&P 500 for 2022 and 2023, respectively, which they believe are “achievable.” Compared with $186.60 in 2021, according to FactSet data.However, strategists stressed that Risks are on the downside. The bank has an “implied EPS change indicator” that it says remains positive, indicating further improvements. Implied reviews of the S&P 500 over the next week remain positive. Energy, utilities, and REITs have the highest sectoral rating among EPS reviews. Transportation and Banks Lead IGs [investment grade]The analysts wrote: “The bank said its index was a ‘helpful signal’ during periods of market weakness and declining earnings, including the stock market crash from 2008 to 2009.
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