Stocks’ 2020 Rally Is Almost Over. A Few Sectors Still Have Juice. By Nicholas Jasinski Updated June 22, 2020 4:39 pm ET / Original June 22, 2020 3:57 pm ET With restrictions eased, Matthew Previtera cuts a client’s hair at 'Les Enfants Terribles' in New York City’s Brooklyn Borough. Angela Weiss/Getty Images The lightening-fast rally in stocks paused in June, after a nearly 45% surge since late March. The S&P 500 turned positive on the year, bounced off that level, and has since hovered between about 3000 and 3200 points. On Monday, the S&P 500 was up 0.4% to 3110. On the index level, at least, the second half of 2020 might end up looking a lot like the past few weeks—but with several large potential risks looming. In a report on Monday, Credit Suisse’s chief U.S. equity strategist, Jonathan Golub, updated his year-end S&P 500 target to 3200, from 2700, citing the process of reopening the economy and unprecedented fiscal and monetary support. “Shelter-in-place restrictions have been rolled back, and the reopening process is well under way,” Golub wrote. “Consumer wallets are swollen with government funds, and economic data—including blowout retail sales and jobs reports—show broad-based sequential improvement.” But those bullish factors are balanced by uncertainties about how consumers, businesses, and governments respond to rising coronavirus cases, pricey stock valuations, and long-term negative consequences of the Covid-19 crisis. That is keeping Golub’s year-end target at just over the S&P 500’s current level. Range Bound?After a rally since late March, the S&P 500has been stuck between 3000 and 3200.S&P 500 index since March 23 bottom Source: FactSet April 2020June22502400255027002850300031503300 Credit Suisse sees $125 in S&P 500 earnings per share in 2020, down from $165 last year. Golub doesn’t expect earnings to fully recover until 2022. But based on the rapid early pace of the economic recovery, on Monday he raised his estimates for the next two years’ EPS—to $155 from $150 in 2021 and to $170 from $165 in 2022. Meanwhile, rock-bottom interest rates and the Federal Reserve’s effective backstopping of credit markets justifies a higher price-to-earnings ratio than at the start of the year, Golub said. At the S&P 500’s February all-time high, the index traded for 19 times forward earnings. Today, it goes for 22 times. Golub’s new year-end target of 3200 is 20.6 times his 2021 EPS estimate, up from a projected forward P/E of 18 times previously. That is still a derating from current levels, however, suggesting that earnings should rise faster than stocks in the second half of 2020. The stock market is a forward-discounting mechanism, and will always move to price-in expected events or trends before they happen. Accordingly, the S&P 500 has returned to where it started 2020, years before the economy or corporate earnings will do the same. But that leaves the market sensitive to any changes in the prevailing thesis of a steady economic recovery under way. Newsletter Sign-up Review & Preview Every weekday evening we highlight the consequential market news of the day and explain what's likely to matter tomorrow. SUBSCRIBE “A variety of factors are likely to hamper a full recovery, including: (1) logistical challenges in reopening public-transit cities such as NYC, (2) less air travel, and (3) job losses which will take years to fully recapture,” Golub wrote. “Economic progress is dependent on the extension of [the Paycheck Protection Program] and unemployment subsidies (at least in part), which have not yet been passed. Election-related tax uncertainties could negatively impact profit growth. Longer-term, debt burdens and a reversal of globalization have the ability to weigh on potential GDP.” The easy gains in the market on the index level have already been made in the cyclicals-led rally since late March, and the S&P 500 could trade in a tight range for the rest of the year. There is likely better opportunity for investors in individual industries and stocks for the rest of 2020, and Golub leans toward defensive and secular-growth sectors. He recommends overweight allocations to technology, internet retail, communication services, consumer staples, and utilities. He is underweight on financials, consumer discretionary excluding internet retail, real-estate investment trusts, materials, industrials, and energy. Finally, Golub is neutral on health care. Write toNicholas Jasinski atnicholas.jasinski@barrons.com https://www.barrons.com/articles/st...ycheck-protection-federal-reserve-51592855633
Rangebound. Gotta side with Morgan Stanley on this one. The world continues to unrelentlessly pour money into US Tech Companies. Especially the top Sovereign Wealth Funds. Norway and UAE have been ridiculous about US Tech. Monsters.
When the stock market is this overvalued, it is usually lower 12 months later PUBLISHED TUE, JUN 23 202010:02 AM EDTUPDATED 41 MIN AGO Fred Imbert@FOIMBERT KEY POINTS The S&P 500′s trailing price-to-earnings ratio is currently sitting at 21.61. The forward S&P 500 PE ratio, which is measured using earnings estimates for the next 12 months, has jumped to 22.18, near its highest levels in almost two decades. RBC’s data shows the market tends to fall over the next 12 months when valuations are this high. https://www.cnbc.com/2020/06/23/whe...lued-it-is-usually-lower-12-months-later.html
What analyst can look at you with a straight face and say apple with 5% growth max trading at a 30 p/e and $1.6 bil cap isn't as much of a bubble as a 30% grower in 1999 trading at a 100 p/e is a liar
At this point its just unimaginable amounts of liquidity with absolutely no where to go but into stocks like apple. And no one will admit its a bubble until after the fact the collapse comes. It's always alway always ends up like that.
A forward P/E of 22 is actually normal range not a bubble. Any major correction from here will be because the virus hurts earnings longer then most expect at this point. Remember, we were clearly NOT in a bubble in January despite what some people posted on here. Forward P/E got up to 24 which is roughly upper band normal for US markets. I will say given the virus the "E" part is questionable so I'm not bullish on broader markets at all. I like certain sectors like mining, here or there energy, and banks on any pullbacks are easy money. I never see you admit you were wrong when you falsely claim markets are a bubble and will crash. And that happens a lot with you. I've barely participated in the IT move keep thinking it's too far too fast; that's on me.