JPMorgan says earnings estimates appear too optimistic, citing the most recent earnings season with soft profit growth and less upbeat corporate guidance:
- firms are seeing demand and prices soften, accompanied by ongoing margin pressure
"The consensus 2024 EPS growth rate of 12% appears too optimistic given an aging business cycle with
- very restrictive monetary policy,
- still rising cost of capital,
- lapping of very easy fiscal policy,
- eroding consumer savings and household liquidity,
- low unemployment rate,
- and increasing risk of a recession for some of the largest economies abroad (e.g., China, Germany)"
JPM acknowledge the US has done better, but this will dissipate:
- "While the US has recently diverged from these overseas economies, in our view it is likely due to longer lags in monetary policy transmission, and we would caution not to interpret this divergence as a sign that the US can avoid the negative impact of high interest rates,"
JPM add they doubt there is further upside for equities from here, reiterating its 4,150 year-end target.
- “We think there is a good chance that equity markets move meaningfully below our year-end projections in the interim.”
