Communications Services
Investors are still cautious and have significant cash that needs to be put to work. Trickle-down of it into the US equity market may extend the rally. Overly bearish futures positioning is also a strong contrarian indicator. Disinflation is good for real earnings growth, and imminent earnings rebound may add support for equities.
Indian EPS growth is set for major disappointments vis-à-vis the lofty expectations. Weak domestic demand amid tight fiscal and monetary policy entails more downside in stock prices. Stay underweight.
The YTD market rally was driven by outperformance of high-quality growth stocks which offer protection in uncertain times. As growth continues to slow, high-quality growth stocks should continue to do well. Hence, we are moving to overweight Growth vs. Value.
We Introduce our new macro models for the Eurozone’s equity earnings, which include sectoral forecasts. Find out what they predict for the next six-to-nine months.
The equity market is back to the 2019 level on an inflation-adjusted basis. However, it is still not cheap as it is not pricing in the possibility of a prolonged and deep earnings recession or a higher interest rates regime. Many areas of the market that appear cheap, are cheap for a reason. The only industries that are cheap because they are growing into their valuations are Energy and Airlines. We are upgrading Airlines to equal weight.
The US equity market is in the midst of an earnings contraction driven by slowing sales growth – a manifestation of the weakening economic demand and loss of corporate pricing power that accompany disinflation. The telecommunications industry is a defensive industry that faces many challenges: Low growth, cut-throat competition, and incessant demands for capital investment.