By Senad Karaahmetovic
The U.S. stock market closed higher last week to fully recover from a Federal Reserve-induced slump earlier in the week.
S&P 500 closed 3.65% higher to trade comfortably above the 4000 mark after bouncing off 3900 support. For this week, all eyes are set on tomorrow when BLS is due to release the CPI data for August. Analysts are calling for a negative reading on an MoM basis with the YoY reading expected to slip to 8.1%.
Heading into the new trading week, here’s what the three top U.S. equity strategists have to say about the state of the stock market.
Morgan Stanley’s analyst: “We think that risk is now particularly elevated as we enter 3Q earnings season. We also noted that it may take until October for stocks to trade lower because more investors now share our view on growth going into a busy conference season and are somewhat positioned for it.”
JPMorgan analyst: “A whole range of commodity prices are down, which is feeding into our call that “bad data will be seen as good”, rather than the traditional angle of falling commodity prices being seen as bearish. We continue to believe that one should be fading the Jackson Hole induced dip, with upside in both Growth and Value, while Defensives remain extremely expensively valued.”
Goldman Sachs analyst: “Equity investors should follow four strategies to drive performance through year-end. (1) Stocks with “quality” fundamental metrics will benefit because tightening financial conditions and the increased cost of capital will constrain valuation expansion for the overall market. (2) Value stocks will outperform under two scenarios – if inflation peaks in the near future and focus turns to the end of the hiking cycle, but also if the Fed tightens too much and the economy slips into recession. (3) Dividends offer investors exposure to S&P 500 fundamental growth while minimizing exposure to equity valuation risk. (4) Stocks with primarily domestic revenues will outperform companies with a high proportion of foreign sales.”