US EQUITIES SHOULD CONTINUE TO DROP, SAYS BARCLAYS AND GOLDMAN SACHS
par Saikat Chatterjee
LONDON (Archyde.com) – Barclays and Goldman Sachs expect U.S. stock markets to continue to suffer following major Wall Street indices suffered their worst session in two years on Wednesday.
Barclays strategists say in a note released Thursday that U.S. corporate margins and future earnings are under pressure due to a combination of factors, from the zero COVID-19 policy in China to the war in Ukraine to the restrictive stance of the Federal Reserve.
“Given the numerous short-term negative catalysts for the Standard & Poor’s-500, we believe risks remain firmly on the downside,” they write.
The generally disappointing quarterly results of major technology groups such as Amazon, Netflix or Alphabet are the main brakes on the progress of the S&P-500, believe Barclays analysts.
In addition, the fiscal stimulus measures put in place during the pandemic had resulted in strong US household consumption of goods, which had translated into strong profits over the past two years, they add.
Consumer spending has since shifted towards services, which will benefit these companies less.
Goldman Sachs strategists estimate a 35% chance that the US economy will enter a recession over the next two years. The behavior of investors, who have abandoned certain categories of stocks in favor of others, suggests that they are speculating on a greater economic slowdown. The S&P-500 has lost 17.7% since the start of the year and the Nasdaq Composite 27%, weighed down by the fall in growth stocks. According to Refinitiv data, nearly two-thirds of S&P-500 stocks are down at least 20% from their 52-week high.
Goldman Sachs points out that during the 12 recessions that the United States has known since the Second World War, American stocks have fallen by an average of 24% between their highest and their lowest level.
A pullback of this magnitude from last January’s peak would result in the stock falling 11% from the current market level. Dividend futures indicate that S&P-500 dividends will decline nearly 5% in 2023.
(Report Saikat Chatterjee; French version Laetitia Volga, edited by Bertrand Boucey)
