Morgan Stanley stiller spørgsmålet, om toppen på markederne allerede er nået. Banken advarer investorer mod at tro, at fordi virksomhedernes resultater var ekstremt gode i 1. kvartal, at de så vil fortsætte. Der kommer ikke længere nogen ydre hjælp, og indtjeningsforventningerne ligger et godt stykke over de normale toppunkter. Da omkostningerne og skatterne vil stige, mens væksten generelt vil aftage, er der risici for virksomhedernes indtjeninger. Derfor anbefaler banken investorerne at holde sig fra de aktier og sektorer, der har haft god fremgang indtil nu og kun koncentrere sig om kvalitetsaktier, hvor forventninger og værdiansættelserne er moderate, f.eks. i sundhedssektoren og dele af fødevaresektoren.
A View from the Peak?
Last week’s much anticipated release of May’s Consumer Price Index turned out to be higher than expected. However, both Nominal and Real 10-Year Treasury yields fell.
The point here is that just like many of our growth measures, it appears that the peak rate of change for inflation may be behind us, too. And, this is why Treasury yields have recently rolled over. It also means that both growth and inflation may disappoint what are now lofty expectations, and that would have negative consequences for stocks more broadly.
The main culprit for such a disappointment is the first quarter level of demand that was aided by a $1.9T fiscal stimulus and a rise in crypto currencies that added nearly $1T to wealth. Neither of these are likely to be repeated in our view; and in the case of crypto, there’s been a $1T reduction of wealth in the past month that could have a negative effect on demand going forward.
While we continue to think growth and inflation will be quite strong over the next year, the peak rate of change can present short term headwinds for popular trades. The Treasury market is an example, but it’s not the only warning sign. Some of the more cyclical equity sectors, especially early cycle ones like autos, home builders and home improvement, retailers, semiconductors and transports have also started to underperform.
In addition to these market signals that growth and inflation may be peaking, we see limited upside ahead for broad earnings revisions from here, too. We worry too many investors may be annualizing abnormally strong Q1 results modelling even further margin expansion from already elevated levels. In addition to the unrepeatable fiscal stimulus and crypto surge experienced during Q1, expenses are ramping up again as businesses reopen and resume normal operations.
However, consensus net profit margin expectations for 2022 sit roughly 100 basis points above all time prior peaks. With rising costs and taxes combined with a slowing rate of change on growth, stimulus, and monetary easing, we think these profitability expectations are at risk.
Our analysis suggests several sectors in particular stand out as outliers on margin expansion relative to sales gains. Many of these fall into the early cycle moniker already mentioned. Therefore, we recommend avoiding these areas for now and position one’s portfolio toward higher quality sectors and stocks where expectations and valuations are more achievable and modest. Healthcare, REITs and Consumer Staples fit that bill.
