The good times for the stock market won’t last long, according to UBS. Equity strategist Andrew Garthwaite warned investors could be in for a “difficult phase” and end the year flat. A combination of profit margins facing stiffer pressure, earnings downside, wider credit spreads as well as Wall Street pricing in a strong recovery are the key factors behind his lackluster outlook. “Revenue growth [are] forecast to accelerate despite a sharp slowdown in nominal GDP [gross domestic product] growth,” the strategist said. “With wage growth now rising above CPI [consumer price index] and PPI [producer price index] inflation, abnormally high profit margins should come under pressure.” Garthwaite’s outlook is in stark contrast to recent market moves. The S & P 500 and Dow Jones Industrial Average reached record highs last week, with the former breaking above 5,100 for the first time on an intraday basis. The Nasdaq Composite hit a 52-week high. The S & P 500 and Nasdaq are both up more than 6% this year, and the Dow has climbed 3.8%. .SPX YTD mountain SPX in 2024 A blowout earnings report from chipmaker Nvidia helped spur the strength throughout equities and fueled a fresh layer of artificial intelligence hype. Garthwaite admitted his downbeat outlook could be wrong, as productivity gains from AI could lead to a 15%-20% advance for the S & P 500. However, he only sees a 35% chance of this occurring. Garthwaite also noted that the recent market highs are peculiar in that fresh records have never occurred while the unemployment rate remains exceptionally low. When the S & P 500 has hit a new all-time high, the average unemployment rate was 6.65% while the intra-index correlation, a measure of macroeconomic complacency, measures 0.34. Last month, the unemployment rate hovered around 3.7% while the intra-index correlation measured 0.12, the strategist added. Market breadth is also typically better when stocks reach new highs, according to Garthwaite. “Poor breadth is a…
2024-02-26 11:13:00
All news and articles are copyrighted to the respective authors and/or News Broadcasters. VIXC.Com is an independent Online News Aggregator
Read more from original source here…
2 min read
2 min read
2 min read
2 min read
