Santander Corporate & Investment : First serious test for credit markets. After the several buckets of cold water coming from the Fed and the ECB since Jackson Hole, the last one in mid-December, here comes a new test for the markets. And especially in the US in view of the 50bp cut still expected for 2H23. And with the equity market still not clear on the S&P500, with 70% of the 383 investors surveyed still anticipating falls (probably in 2H23 – Bloomberg).
For this reason, beyond the discounted 25bp for the FOMC and, above all, a forward guidance that gives us more clues about the expected proximity of the end of the cycle, the results of Apple, Meta or Exxon this week could be equally relevant.
In Europe, our equity strategists are not clear either and believe that the consensus remains optimistic, expecting +1.3% for the BpA of the €Stoxx600 (FactSet). Growth that would be added to the 18.5% of 2022e in an environment in which margins are still expected to be flat year-on-year despite strong input cost inflation and the gap with selling prices, especially in services, as revealed by the flash PMIs in January.
And, as our colleagues point out, the 50% growth in profits in 2023 vs 2019, or 10% year-on-year, would double the average annual rate of +5% of the last twenty years. Doubts about the sustainability of consumption driven by re-opening effects in an environment of economic stagnation (at best) and falling real disposable income are reasonable.