Merrill hæfter sig ved, at virksomhedernes gode indtjening fortsat giver basis for kursstigninger trods de store stigninger på 21 pct. i år. Men der er risici i forbruget og med stigende lønomkostninger, der kan presse indtjeningen, og der er geopolitiske risici. Derfor bør investorerne være parate til taktiske tilbagetog, dvs. at reducere aktierne i de porteføljer, der har haft en stærk aktieovervægt.
Risk Dashboard Update
U.S. Equities have churned higher so far this year, with the S&P 500 up 21% year-to-date.
Strong performance has come on the back of easy monetary policy, lower than anticipated
bond yields, and a robust economic backdrop. While we are optimistic that the secular bull
market for Equities still has room to run, we see the potential for near-term choppiness
due to some emerging macroeconomic risks. Investors should monitor the following
dynamics as we head into the end of the year.
Earnings and Margin Pressures
Strong Q2 earnings and record margins have helped drive U.S. equity returns so far this
year and demonstrate that companies have remained resilient against rising cost
pressures (Exhibit 4). S&P 500 earnings per share (EPS) beat consensus expectations by
17%, well above the average 2% beat from 2000 to 2019. Net margins (ex-Financials)
jumped to a record high during the quarter, reaching 13.1% and surpassing the previous
quarter’s record of 12.5%.5 But as the strong positive effect of policy support starts to
wane, questions over whether this extraordinary earnings story can be carried forward into
2022 have come into focus.
Companies could experience some margin degradation if wage pressures accelerate,
especially as companies allude to labor shortages as a major challenge. While an impaired
labor supply could improve in the coming weeks with the expiration of unemployment
benefits, it is likely that wage pressures could linger and squeeze margins as demand
remains robust.
AHE for all employees has risen by roughly 4% year-over-year (YoY) over
the past three months, and some of the Fed districts have reported “brisk wage gains,”
especially among lower-wage workers, with employers even moving to offer additional
bonuses, raises and flexible work arrangements in an effort to attract labor. Persistent
supply chain disruptions have also contributed to rising costs, and if consumer sentiment
continues to weaken, companies may find it more difficult to pass some of these off
through higher prices.
Industries that are more labor intensive, or rely on a larger employee base to support rising
sales, such as retail, restaurants, hotels, etc., could be challenged. Industries with greater
pricing power or the scale to spread costs (larger, higher-quality companies like tech) may
be able to manage and adapt to these pressures more smoothly and in turn may see less
earnings sensitivity.
Portfolio Considerations
Despite a growing number of risks developing over the next several months, we remain
constructive on Equities versus Fixed Income and cash. Equities may consolidate their
gains, and there could be pullbacks, but the bullish uptrend should be supported by a
strong consumer, improving corporate earnings and a still-accommodative monetary policy
environment. We suggest staying invested and for those portfolios that have experienced
a significant drift higher in Equity weights (due to appreciation) to consider rebalancing
back to tactical targets.
