FOMO (“fear of missing out”) is a well-known social media phenomenon. Now, one investment strategist says he’s OMO (or “okay if you miss the boat”) when it comes to this year’s stock market rally because he’s worried about profits and stock price spikes.
“I don’t think they’re going to take that much risk because of valuation,” said Julie Beal, chief market strategist at Cain Anderson Rudnick, an investment firm with nearly $60 billion in assets under management. “It’s scary how narrow the rally was.”
Stocks have had a tough week.
S&P500 index
Approximately 1% decrease,
Dow Jones Industrial Average
It fell nearly 2% after a better-than-expected consumer inflation report released Wednesday. However, valuations still look expensive. After rising 8% this year, the S&P 500 trades at more than 21 times projected 2024 earnings, higher than the average of the past five and 10 years.
“You need growth to achieve amazing upside,” Beer says. “Otherwise, high multiples could get compressed, and that could happen quickly. Investors would run for the exits.”
And growth is what companies need to deliver as they report first-quarter earnings and outlook for the rest of the year.
On Friday, several large financial companies began their profit parades with mixed results. Wells Fargo and Citigroup stocks were subdued, but CEO Jamie Dimon said the “global situation is volatile” and that “sustained inflationary pressures … are likely to continue.” JPMorgan Chase & Co. fell as a result of the warning.Goldman Sachs Group, Bank of America
,
Morgan Stanley reports this week.The same goes for Taiwanese semiconductors.
,
johnson & johnson
,
UnitedHealth Group, United Airlines, CSX
,
procter and gamble
,
And Netflix
.
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Analysts expect first-quarter earnings growth for S&P 500 companies to be only 3.6%, according to FactSet.And it’s largely driven by technology – think Nvidia
,
super microcomputer
,
Part of artificial intelligence and healthcare, namely weight loss drug makers Eli Lilly and Novo Nordisk.
.
“The dichotomy and dispersion of earnings continues,” said Joe Amato, chief investment officer at Neuberger Berman. He pointed out that there is a possibility of a decrease.
Revenues are expected to improve as the year progresses. Second quarter profits are expected to increase by nearly 10%, and overall profits for 2024 are expected to increase by 11% compared to 2023 levels. “We should start to see a better balance,” Amato said. “The resilience of the U.S. economy should provide companies with momentum in their earnings.”
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It’s time to put up or shut up. Anthony Saglimbene, chief market strategist at Ameriprise Financial, said he’s not sure consumers and business customers will continue to spend enough to support broad-based profit growth. While overall inflation may or may not be receding, many Americans still feel strapped for cash, especially as rent and gas prices continue to rise. “Many companies are finding it a more difficult time to raise prices,” Sagrimbene said.
I pray that the demand for your products and services will not evaporate. Wall Street needs strong earnings more than usual as expectations for interest rate cuts fade. The good news is that stocks typically track earnings, so even if interest rates rise, strong earnings growth could offset concerns about inflation or a less dovish Federal Reserve. is.
Is that too much to ask for?
Fix and amplify
IBM will report earnings on April 24th. A previous version of this column incorrectly stated that the company would report earnings this week.
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Email: paul.lamonica@barrons.com
