The outlook for the stock market
2023-01-17
■ U.S. stocks: Pay attention to the speeches of important figures from the Federal Reserve and the settlement announcements of major U.S. companies
■ European equities: dispelling excessive devaluation
The US S&P and Dow Jones averages continued to rise. Affected by the U.S. Consumer Price Index (CPI) in December last year, people realized that inflation was slowing down. Also, the idea of a slower pace of rate hikes grew against the backdrop of speeches from key figures at the US Federal Reserve (FRB). The managers of U.S. financial giants sounded cautious about the economic outlook at a settlement briefing over the weekend, but shares held firm.
Before the US Federal Open Market Committee (FOMC) held on January 31 and February 1, participants entered the lockdown period of controlling statements related to financial policy this weekend, so we should pay attention to the statements of important people. In addition, the final accounts of major American companies in the period of October to December last year are the same as those of major American financial companies last weekend. If the management shows a cautious attitude towards the economic outlook, the rising tone of stocks against the background of the expected slowdown in interest rate increase may change. I hope everyone will be vigilant.
The European Stoxx 600 index continued to rise. Uncertainty over Europe's economic outlook has also eased as China's policies to curb the spread of the novel coronavirus have eased further. The luxury goods industry, production, and machinery materials industry drove up the stock price. The Euro Stoxx 600 continued to rise over the weekend, closing at its highest level since April 2022.
The predicted PER*1 of the Euro Stoxx 600 Index for the coming year (12.0 times, at the 13th time point) is at the lower limit of the central range (12-15 times) from 2014 to 2019 before the outbreak of the new crown epidemic, and has reached the point where the feeling of excessive depreciation level can be relieved. The downgrade of corporate performance outlook is proceeding slowly. With the ease of economic deterioration concerns, the recovery of PER will lead to the rise of stock prices. Once there is a round, the rise of stock prices will become heavy.
*¹PER = Price earnings ratio