JPMorgan Analysts Warn: Stocks Face Tough Earnings Season

Led by Mislav Matejka, JPMorgan analysts advise caution as earnings season commences, warning against overestimating stock gains. Despite economic growth and lower rates, they counsel against anticipating a notable surge in equities. Matejka’s team highlights prudence amidst widespread optimism.

Expectations Trimmed Ahead of Reporting Period

Matejka notes that initial-quarter profit projections have been reduced, providing a lower benchmark for companies to exceed expectations. The S&P 500’s earnings outlook appears challenging, particularly when excluding tech giants, suggesting potential headwinds for the broader market.

“Matejka’s analysis highlights lowered profit projections, posing challenges for S&P 500’s earnings outlook,” WSJ Print Edition said.

Record Highs Prompt Concerns of Overvaluation

According to Matejka, investor positioning is precarious, with record highs in the benchmark index. Despite this, he warns that the market may be overly optimistic, especially given the divergence between earnings forecasts and actual performance.

JPMorgan Analysts Cautious Despite Strong Q1 Performance

JPMorgan’s equity analysts remain cautious compared to their counterparts on Wall Street, citing concerns over geopolitical tensions and inflationary pressures. Matejka emphasizes the need for clear earnings acceleration to justify current equity valuations.

Semiconductor Projections Face Headwinds

Citigroup Inc. analysts predict a subdued earnings outlook for US semiconductor companies, citing delays in AI forecast revisions by key players like Advanced Micro Devices Inc. Additionally, Morgan Stanley’s Michael Wilson warns of increased sensitivity to rising rates, particularly if the US 10-year bond yield exceeds 4.4%.

Differing Views on Market Direction

While some, like Societe Generale SA strategist Manish Kabra, remain optimistic about a strong earnings season driving US stocks, others express caution. Kabra believes that while climbing bond yields pose a challenge, the Fed’s rate policy could mitigate potential risks.

Amidst diverging opinions, investors brace for volatility as earnings season unfolds against a backdrop of economic uncertainty and geopolitical tensions.

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