Q4 earnings season is about to start. Can corporate earnings prospects support US stocks to continue to rise?

Although the Federal Reserve's "loud eagle voice" hit the risk appetite of US stocks overnight, on the whole, Wall Street is still optimistic about the trend of US stocks in 2022. One of the main reasons is that investment banks are mostly optimistic about the profit prospects of individual stocks of US stocks.

Scott Chronert, a strategist at Citi, believes that the rise of US stocks at the end of last year is justified. Considering the prospect of corporate profits, US stocks will continue to rise. "The company's performance in the fourth quarter should support the current strength of the stock market.". He predicted that the US Standard & Poor's 500 Index is expected to rise to 5100 points by the end of this year. This is a new level from the previous forecast of 4,900 points, which also means that he thinks the S&P market will increase by about 6% this year.

(The daily chart of the S&P 500 index comes from British Financial Situation Investing.com)

In fact, since the beginning of November, before the Fed's words hit the market, the S&P 500 index has risen by 4%. Besides the "Santa Claus market", the optimism of market investors on the company's earnings has also pushed up the stock price. The new round of US stock earnings season is about to be unveiled, which may write a new footnote to the current market situation.

On the one hand, investors do have reason to be optimistic about the performance of enterprises in the fourth quarter and even 2022.

Supply chain problems appear to have begun to ease in December, meaning the surge in business costs will start to slow, and a slowdown in costs will mean higher profits. Scott Chronert also pointed out in the research report that "the gradual improvement of the supply chain will help the company's earnings achieve positive correction in the first half of 2022."

On the other hand, the earnings outlook of US stock companies is still cloudy, and investors have to be cautious .

The Federal Reserve is expected to raise interest rates several times this year. If the interest rate is raised too fast, the higher interest rate will reduce the discounted present value of future profits of enterprises, which will affect the US economy and corporate earnings. Investors still need to take a deep breath and prepare for a sharp fluctuation.

Moreover, a large part of the American economy is the service industry, including leisure, tourism, hotels and other industries. These industries have been greatly affected by the epidemic, and the current profit level is still far lower than the pre-epidemic level. Many of these companies predict that they will not be able to return to the pre-epidemic profit level in the next year. The profit blowout of US stocks in the previous two quarters was realized in the year-on-year growth of these industries.

According to Zacks' data, among the 16 industries covered by Zacks, only 5 sectors' earnings forecasts have been raised, and 11 industries' prospects have been lowered, among which the energy sector's forecasts have been raised the most, and the forecasts of automobile, finance and technology stocks have also been raised, but transportation, non-essential consumer goods, retail and industrial products have been lowered the most.

In the third quarter of 2021, the profit data of US stock companies has set a new quarterly record, exceeding the record of the previous quarter. However, the unusually high growth rate is of course difficult to sustain, because it compares with the severe slowdown related to the epidemic last year. In the fourth quarter, it is expected that the growth rate will return to routine and the growth rate will slow down. However, according to FactSet data, analysts expect that the total earnings per share of S&P 500 companies will still increase by slightly more than 9% in 2022.

The downward trend in corporate earnings prospects is closely related to profit margins, as the trend in labor, inputs, freight/logistics and other production line costs continues to rise. Judging from the current market consensus, the inflation of these expenditures may be temporary, which is inseparable from the interruption related to the epidemic. As mentioned above, it is expected to tend to balance eventually.

Author: Li Yingwei

Disclaimer: The contents and opinions of this article are for reference only, and do not constitute any investment suggestions. Investment is risky, so you should be cautious when entering the market.

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# 美联储加息信号来袭,有哪些应对策略?

Disclaimer: The above content represents only the personal views of the poster and does not constitute investment advice on this platform.

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  • 美股不用分析 一直涨  因为分析好多年了 从没对过
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  • 现在的美股都有点热点散乱,又是加息有事缩表,不友好吧?
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  • 看过李英维老师的几篇文章,比较有前瞻性。
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  • 能源板块的预估上调幅度最大是不是意味着可以布局一些这方面的股票。
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  • 花旗的策略师Scott Chronert靠谱不?为什么结论跟我的意识不一样?
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  • 投行机构们一方面喊着看好美股,一方面不断减持。
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