US stock market: July-September quarterly financial report review
2023-11-17
■The company's performance is currently good, but its outlook for the future may be lowered.
■The rise in stock prices is difficult to sustain and is greatly affected by fluctuations in US long-term bond yields.
As of the 10th, 455 companies in the S&P 500 index have released their quarterly financial reports for July to September. According to financial information company LSEG I/B/E/S, 81% of companies reported earnings per share (EPS) that exceeded market expectations, expected to increase by 6.3% year-on-year, surpassing the 1.6% increase in early October before the reporting season. From an industry perspective, finance (3.6%), communication services (3.3%), and general consumer goods (2.3%) have a high contribution. Although there are also financial reports from retail and semiconductor companies this week and next week, the current results are considered good.
In terms of prospects, it is expected that the EPS will have been downgraded from early October to November 10th for the October-December quarter (down from 11.0% growth to 5.8%) and for the January-March quarter next year (down from 9.6% growth to 7.8%). Amid concerns about a possible slowdown in economic growth, some companies have shown uncertainty in their performance prospects, making it difficult to expect stock price increases to be led by expected EPS improvements. However, the EPS growth rate of companies in the S&P 500 index over the next year is 10.7%, maintaining a relatively high level. The possibility of a downward revision of the performance outlook and becoming a clue to a significant decline is relatively low without worsening concerns about the economic downturn.
The expected price-to-earnings ratio (PER) of the S&P 500 index is 18.2 times, which has increased since late October. The company's performance outlook has entered an overestimation zone relative to the stock price level. In addition, the stock price level relative to the yield of treasury bonds is still high. The profit return gap (stock profit return - yield of US 10-year treasury bonds) is also known as stock risk premium, which is a method to judge the relative overvaluation or undervaluation of stocks by comparing it with the yield of treasury bonds. During the period from 2008 to 2021, it was usually above 3%, but currently it is 1.04%. Although it has expanded since mid-October (0.63%), there is still a sense of overvaluation in the stock. With investor sentiment becoming optimistic, the S&P 500 index may temporarily rise to the PER20 level, around 4800 points. However, it is difficult to predict the improvement of the current corporate performance outlook, considering that the possibility of maintaining this level after the stock price rises is relatively small. It is expected that the volatility of long-term bond yields in the United States will lead to continuous fluctuations in the stock market.
■The rise in stock prices is difficult to sustain and is greatly affected by fluctuations in US long-term bond yields.
As of the 10th, 455 companies in the S&P 500 index have released their quarterly financial reports for July to September. According to financial information company LSEG I/B/E/S, 81% of companies reported earnings per share (EPS) that exceeded market expectations, expected to increase by 6.3% year-on-year, surpassing the 1.6% increase in early October before the reporting season. From an industry perspective, finance (3.6%), communication services (3.3%), and general consumer goods (2.3%) have a high contribution. Although there are also financial reports from retail and semiconductor companies this week and next week, the current results are considered good.
In terms of prospects, it is expected that the EPS will have been downgraded from early October to November 10th for the October-December quarter (down from 11.0% growth to 5.8%) and for the January-March quarter next year (down from 9.6% growth to 7.8%). Amid concerns about a possible slowdown in economic growth, some companies have shown uncertainty in their performance prospects, making it difficult to expect stock price increases to be led by expected EPS improvements. However, the EPS growth rate of companies in the S&P 500 index over the next year is 10.7%, maintaining a relatively high level. The possibility of a downward revision of the performance outlook and becoming a clue to a significant decline is relatively low without worsening concerns about the economic downturn.
The expected price-to-earnings ratio (PER) of the S&P 500 index is 18.2 times, which has increased since late October. The company's performance outlook has entered an overestimation zone relative to the stock price level. In addition, the stock price level relative to the yield of treasury bonds is still high. The profit return gap (stock profit return - yield of US 10-year treasury bonds) is also known as stock risk premium, which is a method to judge the relative overvaluation or undervaluation of stocks by comparing it with the yield of treasury bonds. During the period from 2008 to 2021, it was usually above 3%, but currently it is 1.04%. Although it has expanded since mid-October (0.63%), there is still a sense of overvaluation in the stock. With investor sentiment becoming optimistic, the S&P 500 index may temporarily rise to the PER20 level, around 4800 points. However, it is difficult to predict the improvement of the current corporate performance outlook, considering that the possibility of maintaining this level after the stock price rises is relatively small. It is expected that the volatility of long-term bond yields in the United States will lead to continuous fluctuations in the stock market.