© Reuters. Shares shall be hostage to earnings supply in 2024 slightly than yields – JPMorgan
JPMorgan strategists have as soon as once more warned that company earnings development might find yourself flat slightly than increased, opposite to consensus expectations for the following 12 months.
The workforce of strategists notes draw back dangers to earnings, pointing to damaging producer worth indexes (PPIs) and the potential for EPS revisions to roll over once more.
“Equities do not look expensive in Europe, US is more stretched, but valuations will be hostage to earnings delivery, not to yields moves,” the analysts stated in a consumer notice.
JPMorgan highlights the chance of upper prices of products bought, lagging wage will increase, increased financing prices, and potential deterioration in gross sales combine and volumes.
JPMorgan means that the surroundings for dangerous belongings is predicted to be difficult within the first half of 2024, with intervals of notable weak point. Nevertheless, there’s a chance of enchancment within the latter a part of the 12 months.
“In the 1H of next year, equities will likely need to negotiate earnings adjustment, as activity slows. We believe that the risk-reward for equities will start fundamentally improving once the Fed is advanced with interest rate cuts.”
The strategists anticipate draw back earnings dangers for sectors similar to banks, autos, shopper discretionary, and industrials, whereas utilities and vitality/mining might exhibit extra resilience.
“Thematically, we avoid stocks with elevated margins vs pre COVID, especially on bloated pricing. Increased Defense spending remains a big theme for 2024, and beyond, as well as Aerospace,” the analysts concluded.
