As the first quarter earnings season of the US stock market slowly opened last week, JPMorgan Chase, which has always been bearish on the outlook for the US stock market, once again issued a pessimistic warning.
Strategists at JPMorgan Chase are not optimistic about the profit prospects of companies in this financial reporting season, believing that except for a few tech giants, the profits of most US stock companies will decline comprehensively.
They also believe that even if US stock companies perform well in their financial reports, it is difficult to push the US stock market higher because most of the optimistic sentiment has already been digested in advance.
Xiaomo's pessimistic outlook for Q1 financial reporting season
The team led by Mislav Matejka, the head of global equity strategists at JPMorgan Chase, wrote in a report that they have lowered their profit expectations for US stock companies in the first quarter.
Strategists say that after excluding several tech giants, most of the constituent companies in the S&P 500 index are expected to see a comprehensive decline in their first quarter profits.
Mattaika also mentioned that as the S&P 500 index has risen to record highs, investor positions appear to be; Quota; Very tight; Quota;.
He said:
"The US stock market has already performed well, indicating that investors are more optimistic than the pessimistic profit forecasts conveyed by selling analysts... We need to see a clear acceleration in profits to prove that the current stock valuation is reasonable, but we are concerned that this may not be achieved."
Mattaika also mentioned that half of the US companies that have announced their performance so far have underperformed the market on the day of the announcement. This also includes JPMorgan Chase itself.
Last Friday, JPMorgan Chase released a mixed first quarter report, as its net interest margin decreased by 4% month on month and its guidance on fiscal year expenses increased, causing the company's stock price to plummet by 6.47% on Friday.
Concerns over rising US bond yields
Although the S&P 500 index rose 10% in the first quarter, JPMorgan Chase's stock strategists have remained pessimistic about the outlook for the US stock market.
Mattaika believes that the stock market underestimates the impact of rising price pressures on central bank policies and bond yields.
Last week, with the US inflation data higher than expected, the possibility of the Federal Reserve's interest rate cut was further suppressed. The yield of the US 10-year treasury bond bond also soared last week, hovering at 4.558% as of the press release, which was near the new high since November last year.
In this context, the previous strong upward trend of the US stock market has been put on hold. The S&P 500 index fell 1.46% last Friday, approaching its 50 day moving average. From the weekly chart, it can be seen that the S&P 500 index has been declining for two consecutive weeks.
JPMorgan Chase strategist wrote in the report, "Although the changes in yields may be partly due to the optimistic economic growth prospects in the United States, we believe that most of them are driven by sticky inflation... The complete reversal of the Federal Reserve's policy focus and the risk of sustained inflation overheating are both on the rise."
In addition to JPMorgan Chase, another well-known "big bear" on Wall Street, Morgan Stanley strategist Michael Wilson, recently issued a warning about the impact of interest rate hikes on stock valuations. He predicted that the stock market would show greater sensitivity to interest rates as the yield of the US 10-year treasury bond bonds soared to more than 4.4%.
&Amp; Quota; On the surface, as the market becomes more picky about corporate quality and profitability, valuation differentiation is increasing; Quota; Wilson said, "The stock market's reaction during the financial reporting season may indicate how risky valuation is."
Of course, there are not only pessimists on Wall Street. For example, Manish Kabra, a strategist at Societe Generale in France, predicted in last week's report that a strong earnings season will continue to drive the US stock market up.
He said that although the rise in US Treasury yields may pose a disadvantage to the S&P 500 index; Quota; The long-term stabilization of Federal Reserve interest rates should suppress yields& Amp; Quota;