U.S. Stock-market Earnings Are Expected to Move Lower Amid Weakening Economy and Stalling Revenue Growth
Given continuing concerns in the market about inflation, what is the $S&P 500 Index(.SPX.US$ reporting for earnings for Q4?
$GE Aerospace(GE.US$, $3M(MMM.US$, and $Lockheed Martin(LMT.US$ exceeded expectations for Q4, although their future outlooks didn't inspire much confidence. Meanwhile, $Verizon(VZ.US$ and $United Airlines(UAL.US$ both jumped on strong earnings, though the airline operator warned that first-quarter results could be hit by the recent grounding of its Boeing 757 Max 9 planes.
Looking at the numbers, the S&P 500's projected net profit margin for Q4 2023 stands at 10.7%, taking a dip from the previous quarter's 12.2%, last year's 11.2%, and even falling short of the five-year average of 11.5%.
It's a clean sweep with all eleven sectors expected to report slimmer net profit margins compared to Q3 2023, with Financials, Utilities, and Consumer Discretionary sectors leading the downturn.
The U.S. stock market may call for a defensive stance as near-term pressures loom over company earnings, according to Wells Fargo Investment Institute.
"Our view is that earnings for all equity classes peaked and will move lower as the economy weakens and revenue growth stalls," Wells Fargo Investment Institute said.
Wells Fargo's examination of the S&P 500's trailing 12-month earnings per share (EPS) during previous recessions issues a caution to investors: company earnings are not expected to emerge unscathed from an economic slowdown. Historical data reveals a median decline of 21.4% from peak to trough in earnings during recessions, underscoring the vulnerability of corporate profitability in such periods.
The firm attributes the recent robustness of U.S. stocks to market anticipations of a unique convergence of conditions: aggressive interest rate cuts, a resilient economy, low inflation, and easy financial and credit conditions—factors that rarely align simultaneously. However, once the economic slowdown is fully factored into market valuations, Wells Fargo foresees an opening to strategize for an anticipated upturn in the economic cycle.
"More cyclically oriented equities should benefit the most when the economy gains its footing and corporate earnings begin to grow again."
Source: Market Watch, Factset, Business Insider
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Hashtags : Quite the opposite actually
151345481 : One or two of these optimistic factors is enough.
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