Investors are missing just how badly the trade war is hitting profit expectations.
 | WED, JUN 12, 2019 | | | | DOW | | NAME | LAST | CHG | %CHG | | CSCO | 55.86 | -1.25 | -2.19% | | AAPL | 194.19 | -0.62 | -0.32% | | MSFT | 131.49 | -0.61 | -0.46% | |
| | S&P 500 | | NAME | LAST | CHG | %CHG | | AMD | 32.18 | -0.23 | -0.71% | | GE | 10.28 | +0.16 | +1.58% | | BAC | 27.95 | -0.29 | -1.03% | |
| | NASDAQ | | NAME | LAST | CHG | %CHG | | AMD | 32.18 | -0.23 | -0.71% | | MU | 32.96 | -1.88 | -5.40% | | CMCSA | 41.45 | +0.23 | +0.56% | |
| |
The June comeback has slowed down but the S&P 500 is hovering less than 3% from a record. While traders have decided not to worry about the trade war, company executives are about to tell us the impact and it won't be pretty.
Companies which derive more than 50% of their sales overseas are forecast by analysts to see a 9% drop in earnings for the second quarter, writes Jeff cox.  So even without full tariffs on China and with a tentative deal hatched with Mexico, businesses are seeing an impact on sales because of the uncertainty President Trump's actions is causing. Apple alone will report a nearly 15% decline in second-quarter earnings next month, according to analysts.
Yet stocks keep going higher. Why? Investors are still betting Trump will strike a China deal before the election and so this profit hit will be temporary.
J.P. Morgan's Marko Kolanovic summed up the market sentiment nicely in a note to clients today: "This situation can also be undone on short notice...If there is a trade deal, which would be rational to expect going into [an] election year, we think that about half of the market damage could be quickly reversed. This would translate into a quick ~5% rally in broad markets... As a strong market and avoiding a recession would boost re-election odds, it would only be rational to expect this outcome."
|
Post a Comment