Wall Street investment banks such as Goldman Sachs and Bernstein have once once more issued a warning that as macroeconomic data continues to deteriorate and U.S. corporate performance expectations are sharply lowered, the recent strong rebound in U.S. stocks may be short-lived and will not last.
After experiencing a sharp decline in the first half of the year, U.S. stocks ushered in a sharp rebound in July. Although JPMorgan Chase bucked the trend, saying that the U.S. economy would avoid recession and rebound in the second half of the year, Goldman Sachs, Morgan Stanley and Bank of America are all warning Investors remain cautious, mindful of recession risks.
Goldman Sachs strategists led by Cecilia Mariotti wrote in a report on Thursday (4th) that if there is no sign of a clear shift in macroeconomic momentum, a short-term strong rebound may mean that the risk of another decline in the market increases, rather than the end of the bear market. signal.
As investors have flocked to stocks once more in recent weeks and market positioning has improved from bearish levels in June, volatility in asset allocations might drag stocks higher in the near term, strategists said. However, strategists don’t think the trough is over for stocks, and say future moves may be more reliant on macroeconomic data.
Bernstein, meanwhile, held the same view, with strategists Sarah McCarthy and Mark Diver saying in a Thursday report that the U.S. corporate earnings downturn cycle is just beginning as stock funds outflow.
Funds have yet to see a reversal of the “huge” $200 billion in inflows in the first quarter, even though investors have stopped buying stocks in the second quarter, they said, and expect stocks to fall once more in the near term.
U.S. stocks rose sharply in July, with major indexes posting their biggest monthly gains since 2020 last month, especially following the Federal Reserve raised interest rates by 3 yards (75 basis points). Investors are starting to be optimistic that corporate results prove they can withstand soaring inflation and a gloomy consumer outlook, while weaker economic data has led investors to increase bets on a dovish Fed turn.
Although U.S. corporate earnings this quarter are better than expected, strategists such as Morgan Stanley and Bank of America said that corporate earnings forecasts need to be sharply lowered before the stock market can fall to a real low.
Berenberg strategists Edward Abbott and Jonathan Stubbs also warned that future declines in corporate performance would pose a threat to the stock market, writing in a recent report that corporate profits might fall by 15% to 20% a year as margins come under pressure.
DayByDay technical analyst Valerie Gastaldy said on Thursday that investors should take profits from the rally because U.S. stocks will be very uncertain from now on andS&P 500 IndexAt the level that most attracts the bears to sell once more.
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