- Credit Suisse just lowered its S&P 500 earnings outlook for the second time this year due to a host of macroeconomic and company-specific factors weighing on the market.
- The firm’s chief US equity strategist, Jonathan Golub, maintained a bullish year-end price target.
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The same worries keep eating at Jonathan Golub.
The chief US equity strategist for Credit Suisse on Monday lowered his corporate earnings estimates for the second time this year. The reasoning for his curbed expectations sounds a lot like what pushed him to cut his estimates back in March, and before that, last September.
It was falling oil prices, along with softening outlooks at big tech companies like Apple, that led Golub to trim his 2019 and 2020 S&P 500 earnings-per-share forecasts earlier this year.
“Since then, oil prices have declined further, economic indicators (such as global PMIs) have moderated, and the outlook for select TECH+ names (including Micron, Intel, Facebook and Alphabet) has weakened,” he wrote in a note to clients on Monday.
The New York-based strategist again reduced his 2019 and 2020 EPS estimates to $166.50 from $170, and to $176 from $180, respectively. That translates to forecasted annual EPS growth of 2.2% (from 4.4%) for 2019 and 5.7% (from 5.9%) for 2020.
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Golub’s tempered expectations are emblematic of the big-picture concerns bogging down investor sentiment amid the US-China trade war — even as stock prices hover around all-time highs.
Analysts and strategists up and down Wall Street are voicing concerns that investors aren’t properly weighing stock-market risks, like unresolved trade tensions rising against a slowing economic backdrop. Federal regulators’ reported anti-trust regulation against big tech companies like Alphabet and Facebook is another long-term risk to factor in, experts say.
“One important source of the weaker data is the trade war, and I’m getting a lot of client questions about potential scenarios for the G20 meeting and implications for markets and the economy,” Torsten Sløk, the chief international economist at Deutsche Bank, said in a Sunday report.
Despite the concerns from different corners of the market and the global economy, Credit Suisse’s Golub remains firmly in the bull camp. He sees the S&P 500 rising about 2.5% from current levels by the end of the year, to 3,025.
“Decelerating economic data, as well as declining interest rates and inflation expectations, should weigh on multiples,” he wrote. “However, the backdrop remains non-recessionary, providing a floor to stock prices.”
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