A reassuring helper who supports expectations for “year-end highs” in US stocks
The rise in long-term US interest rates putting pressure on the US stock market
The 10-year government bond yield was temporarily in the 4.54% range in the US bond market on the 25th, reaching a high level for the first time in about 16 years since 2007/10. In addition to prolonged monetary tightening observations by the Fed in the background, the rapid expansion of US government debt since the COVID-19 pandemic has also stirred up market anxiety due to the expansion of the US budget deficit. According to the US Treasury Department, US government debt has broken through 33 trillion dollars and hit a record high. Based on the fact that the US debt at the end of 2019 was 23 trillion dollars, it is calculated that 10 trillion dollars have accumulated over 3 and a half years since the COVID-19 pandemic. The upward trend in long-term US interest rates over several months became heavy, and it began to decline in August $S&P 500 Index (.SPX.US)$ It has fallen by about 7% until the 27th of this month. It is estimated that it will be negative for the first time in a year on a quarterly basis (July-September).
Multiple sources of anxiety attack at the same time
Not limited to prolonged observations of interest rate hikes by the Federal Reserve, issues of concern such as the fact that the American Auto Workers Union (UAW) went on strike simultaneously for the first time in history at the 3 states and 3 bases of “Detroit 3,” concerns about the closure of US federal government agencies, and the resumption of student loan payments have come down at the same time, and it seems that there is no shortage of uneasy elements about the future of the US economy. Nonetheless, there are many bullish views that place expectations on the “year-end high” of the US stock market. From the viewpoint of anomalies in the US stock market and a pick-up in corporate performance, I would like to seize the current downward phase as an opportunity to buy.
Helpers at the end of the year's high school part 1, anomaly effect
In the US stock market, historically, the stock price increase rate in January is higher than in other months, and investors are paying attention to the trend that the S&P 500 tend to rise in November and December while there are various anomalies such as stock prices falling easily in September. According to CFRA Research, after 1945, the S&P 500 declined by an average of 0.6% in September, while November and December rose by an average of 1.4% and 1.6%, respectively, and it is said that the performance of the year is the best during the two months at the end of the year. Also, if you look at the monthly average performance of the S&P 500 types over the past 20 years, you can see that October is +1.3%, November is +1.8%, and December is +0.9%, and performance during the 4Q period is excellent every year.
Helpers for year-end highs part 2, performance improvements for major US companies
After all, improving the performance of US listed companies is essential as proof of anomalies in the US stock market. According to ZacksResearch, the 23-year 3Q results of major S&P 500 companies showed a 0.8% increase in sales compared to the same period last year, while profit declined 2.2%, and a profit decline forecast for 4 consecutive quarters was shown. Of these, excluding the same 39.7% decline in profit in the resource sector, it is said that the results of major US companies for the 23rd 3Q will increase sales by 3.5% and profit increase by 3.1% from the same period. What is attracting attention is that the 3Q earnings forecast has bottomed out after 6/23. Excluding downward revisions in the resources sector and financial sector, upward revisions overlapped across the board in the 3QEPS outlook for major sectors. Among them, while upward revisions in the IT sector stand out, $NVIDIA (NVDA.US)$ The upward revision of the 2024/1 3Q (August/10) EPS outlook is unrivaled. The company's EPS forecast as of 9/26 was 3.32 dollars, which was revised upward by 49.5% from July.
Major US companies bottomed out with profit decline forecasts for the 23rd 3Q, and are expected to enter a trend of double digit profit increase from the 24th 2Q, with a 5.3% increase from the same period last year in the 23/4Q, a 6.7% increase in profit in the 24th 1Q, and an 11.4% increase in profit in the 24th 2Q. Also, in the annual EPS forecast, compared to the forecast of a 3.1% decrease in profit from the previous year in 2023, a growth scenario of a double-digit increase in profit for major US companies after 24 is depicted, with a 12% increase in profit in 24 and an 11.4% increase in profit in 25. In addition to anomalies, there seems to be no doubt that improving US corporate performance is the biggest helper in the US stock market.
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