INSUBCONTINENT EXCLUSIVE:
Next week will go a long way in determining whether investors should be concerned about the dawning of an earnings recession or whether
back-to-back quarters of negative growth can be avoided in what is the heaviest week for profit reporting by US companies.
Heavy hitters
Facebook and Amazon are due to report as well as a dozen Dow components such as United Technologies, Coca-Cola, Microsoft and Exxon
reports, the market is going to get exhausted and it is going to back off
As of Thursday morning, they see profits declining 1.7 per cent.
Rapidly sliding expectations for second-quarter profit growth have sparked
concerns about an earnings recession
Right now estimates are for growth of 2.1 per cent in the second quarter, down from the 6.5 per cent increase at the start of the year and
investment officer at Bokeh Capital Partners in Pittsburgh.
Forrest said that while some companies have been able to hold the line on
earnings due to their ability to control costs, investors would rather see earnings growing on consumer strength.
Refinitiv data show 77 SP
500 companies have reported, with 77.9 per cent topping expectations, compared to the 65 per cent beat rate since 1994 and the 76 per cent
over the past four quarters.
But in a recent note to clients, Morgan Stanley US equity strategist Michael Wilson said that while companies
with the SP 500 now near the top of their valuation range with a forward price-to-earnings ratio of 16.8, there is not much upside remaining
without a resurgence in growth that the market currently anticipates.
That return to growth has also been cast into doubt by the less than
enthusiastic picture being painted by corporate outlooks
The current ratio of negative to positive preannouncements stands at 2.7, well above the 1.5 average over the past four quarters but in line
season further towards an earnings recession, that may still not derail the market, which was able to recover from the last one in 2016 that
was growing once again and we are sort of in a similar situation this time around
