by Farah Elbahrawy
Analysts are busy slashing earnings estimates in the US due to the risk of a severe economic slowdown, according to Morgan Stanley’s Michael Wilson.
The S&P 500’s earnings revisions breadth — or analyst estimates upgrades versus downgrades — is now at levels rarely witnessed, approaching downside extremes in the absence of a recession, the strategist said.
“Companies face more uncertainty than they have since the early days of the pandemic,” he wrote in a note. “This is weighing on earnings revisions.”
Analysts expectations have come down significantly. They cut their estimates for first-quarter S&P 500 earnings-per-share growth to 6.9% from 11.4% at the start of the year, according to data compiled by Bloomberg Intelligence.
Wilson points out that earnings revision breadth peaked almost a year ago. That’s well before the S&P 500 reached its most recent record, supporting his view that the correction is far more advanced than acknowledged by the consensus.
“This is why we are now more interested in looking at stocks/sectors that may have discounted a mild recession already even if the broader index has not,” he said. “In short, if a recession is averted, markets likely made their lows two weeks ago. If not, the S&P 500 will likely take those lows out.”
The strategist sees 5,000 to 5,500 as the likely range for the S&P 500 until the risk of a recession is either confirmed or refuted by hard data, with jobs reports being the most important. The index closed around the middle of this range, near 5,280, on Friday.
US equities have sold off this year over concerns that President Donald Trump’s proposed tariffs will hurt the economy while stoking inflation. The ongoing earnings season has done little to lift sentiment, and investors are increasingly looking for opportunities outside the US. The MSCI World Index of developed countries excluding the US has climbed over 6% this year so far, while the S&P 500 is trading 10% lower.
Wilson said international earnings revisions are now following the US lower at an accelerating rate. The adjustment looks more advanced for Europe and China, he noted.
“The relative performance of the US versus Europe can now swing back in favor of the US even in a down market,” he wrote.
Copyright Bloomberg News
Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.
From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.
"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.
Chair also praised the passage of stablecoin legislation this week.
Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
