Source: Zhitong Finance Author: Ma Huomin
Investors expecting huge profits in 2024 are likely to be disappointed.
According to Bloomberg's latest Markets Live Pulse (MLIV) survey, investors expecting huge profits in 2024 may be disappointed. Sell-side analysts generally expect the profits of S&P 500 companies to reach historic levels this year, but 50% of MLIV Pulse's 380 respondents think this forecast is too high. According to the survey, the economic slowdown is the biggest risk facing corporate profits this year.
The survey results suggest that after the S&P 500 index rose 24% in 2023, profits will not be a key catalyst for the rise in the US stock market this year. Despite better-than-expected corporate profits last year, which helped drive up stock valuations, the S&P 500 ended nine consecutive weeks of gains in the first week of January.
“Investors have high expectations for a healthy soft landing in 2024,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management SA. “I'm more careful.”
40% of respondents said the slowdown in US consumer spending growth could weaken the economy. Another 38% expect this year's shopping pattern to be similar to last year's, leading to a “golden-haired girl” scenario where the economy will not overheat or cool down.
“Profit expectations in some areas seem a bit high, such as some consumer sectors,” said Nicole Kornitzer, portfolio manager at Buffalo International Fund, a subsidiary of Kornitzer Capital Management. “Consumers seem frustrated by all the price increases in the past.”
As a result, most of the interviewees think this year's investment$JPMorgan (JPM.US)$or oil giants$Exxon Mobil (XOM.US)$So-called value stocks are a winning strategy. J.P. Morgan Chase will release its earnings report on January 12, kicking off the earnings season. The company's stock price hit a record this year.
Although value stocks are expected to lead the way, respondents expect that the six largest US banks will continue to focus on cost management by maintaining the number of employees. Only 3% of people think that big banks will expand the number of employees; most people think that banks will keep the number of employees unchanged or continue to lay off employees.
De Mello said that the two key value sectors, finance and energy, are likely to have different trends this year. He added, “Financial stocks are still at a reasonable price, and energy stocks will depend on oil prices.” Oil prices are one of the main channels through which geopolitical risk affects the financial market, and geopolitical risk is rising.
Still, the preference for value stocks suggests that the stock market boom fueled by growth stocks may come to an end in 2023. In 2023, the biggest increase among the constituent stocks of the NASDAQ 100 index$NVIDIA (NVDA.US)$The closing price was $495 per share, more than tripling, but 86% of respondents don't expect the chipmaker to reach $1,000 this year.
The bullish sentiment may have peaked at the moment. HSBC Holdings strategist Max Kettner downgraded the stock rating from increasing holdings to tactical reducing holdings, waiting for a better re-entry point, such as when market sentiment and positions become less tense again. Sanford C. Bernstein strategists Sarah McCarthy and Mark Diver also recommended being cautious about the stock market in the short term after extreme bullishness.
Despite this, Wall Street strategists and investors still expect the US stock market to rise in 2024. Nearly one-third of respondents plan to increase their exposure to the S&P 500 next month, the highest level since the MLIV Pulse survey began asking this question in August 2022.
MLIV survey shows investors' interest in US stocks is at an all-time high
“The market needs a breath from time to time. You have to take into account the fact that investors are still highly skeptical about the economy and earnings,” said Callie Cox, an investment analyst at eToro US. “Spending remains good, but profit growth is expected to come from cost cuts. It's progress, but it's not the kind of progress you'd like to see. It may be difficult for investors to handle this situation.”