Published: October 23, 2023 at 14:32 ET
BlackRock strategists aren’t holding their breath for U.S. companies to finally turn positive in the third quarter.
While many investors had hoped that the S&P 500 SPX would finally break its streak of negative quarters and post slightly positive earnings growth in the third quarter, a team of strategists at the BlackRock Investment Institute suspects that earnings growth will remain fairly stable for some time (See list).
Their…
BlackRock strategists aren’t holding their breath for U.S. companies to finally turn positive in the third quarter.
While many investors had hoped that the S&P 500 SPX would finally break its streak of negative quarters and post slightly positive earnings growth in the third quarter, a team of strategists at the BlackRock Investment Institute suspects that earnings growth will remain fairly stable for some time (See list).
Their chart also highlights a key theme for 2023 in which a small group of major technology stocks continue to generate capital gains. Of these, Microsoft Corp.
MSFT
and Google’s parent company, Alphabet Inc.
GOOG
will report earnings on Tuesday, followed by Meta Platforms Inc.
UNDERWORLD
and Amazon.com Inc.
AMZN
later in the week. Tesla company
TSLA
reported earnings last week, while Apple Inc.
AAPL
is expected to be published early next month.
To read: Analyst warns Apple faces ominous set-up leading to profits
Markets expect year-on-year earnings growth to be slightly positive in the third quarter. We believe hopes for long-awaited growth mask a still relatively stagnant uptrend, Wei Li, chief global investment strategist with the BlackRock Investments team, wrote in a client note on Monday.
In our view, moderate earnings growth also does not reflect the market narrative of a resilient economy.
Instead, they see the hidden stagnation over the past 18 months as going unnoticed as consumer spending, gross domestic product and job growth remain flat, masking the problem.
But with the 10-year Treasury yield BX:TMUBMUSD10Y briefly topping 5% on Monday for the first time in 16 years, markets are starting to confirm our view that interest rates will stay higher for longer under the new regime, the team said.
To this end, the team will overweight short-term Treasuries BX:TMUBMUSD01M, but also likes quality in equities and fixed income. They also believe that AI still has advantages in investing in changing globalization, the transition to a low-carbon economy and the future of finance.
Stocks were flat or slightly up on Monday, but the S&P 500, Dow Jones Industrial Average DJIA and Nasdaq Composite Index COMP
They were on pace to post monthly losses in October, according to FactSet.
The S&P 500 was expected to post third-quarter earnings growth of 1.1% year-over-year, according to LSEG I/B/E/S.
To read: Tesla reveals more DOJ investigations
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Image Source : www.marketwatch.com