(Boursier.com) – US stock markets dropped in October, and even in the third quarter, the results of companies are well above the expectations of analysts in Europe as in the US? Is this the beginning of a large correction, or even a bear market, or a simple break at the longest rise in Wall Street history, which now lasts 9 years and 7 months? United States of America
The answer to this question will depend on many factors that will determine Donald Trump's ability to follow, including the US-Chinese trade tension, the Fed's monetary policy, and the results of the mid-term elections in the United States. not the reforms, especially the infrastructure renewal program.
Technology closed markets in October
Wall Street in October fell by 5% to the worst month in seven years. Dow JonesFor 7% S & P 500 and 9.2% Nasdaq CompositeThe latter, which is rich in technology stocks, has sometimes benefited from a dizzying rise for several years. For Nasdaq, this month of October, there was even the worst month of 10 years in November 2008 in the middle of "subprime" credits.
6 a group of internet giants (Facebook, alphabet, apple, Amazon, Microsoft, NetflixDespite the general results exceeding expectations in the third quarter, Refinitiv declined to 13% even in October. Investors were disappointed by the predictions of these companies, including Amazon and Apple, which are cautious for the year-end sales, even if there is a slight difference to the forecast.
Profit increased 25% from 2017
However, 74% of the S & P 500 companies, which published their third-quarter accounts in October, showed a better-than-expected performance of 78%, with 61% gaining above expectations. According to the statistics of Factset (Dow Jones group). The average increase in earnings per share is close to 25% (24.9%) compared to the same period of 2017. If this figure is confirmed for all S & P 500, it will represent the best performance from the 3rd quarter of 2010 onwards. According to Factset. The analysts' consensus at the end of September was that the "S & P 500" will increase by 19% in the quarter 2018.
As for the estimates of the fourth quarter, most of the cases did not deteriorate. However, analysts revised their 4 & # 39; estimates of the 46 companies in the S & P 500 while revising only 24, while concerns over other companies have not changed. their perspectives.
A sharp slowdown in profit growth in 2019?
Investments in the stock market believe that investors should slow down their corporate profits in 2019 significantly, not according to historical data, but with future earnings per share. If the markets are right to worry, however, they see that risks are growing for the next quarter, starting with an increase in customs barriers and rising business costs. raw materials.
In addition, the rise in interest rates under the leadership of the Federal Reserves will increase financial costs and reduce the profit by increasing borrowing. Finally, the corporate tax cuts imposed by Donald Trump in 2017 were digested in the first two years, reducing the positive main impact of their implementation.
Asset manager for 2019 Blackrock Still waiting for a year marked by a positive environment for company profits still marked. Analysts' consensus expects a growth rate of 10% in 2019 after an increase of 20% in 2018. Some analysts are more optimistic, especially Morgan StanleyIt expects a limited gain of 5% in earnings per share next year. This significant slowdown is particularly related to the policies of the Fed and other central banks, which, as the US Federal Reserve analysts say, as tightens monetary policy more than the market (and possibly the economy).
Wall Street usually proceeds from "mid-term exams" the following year
In the short term, the eyes of the markets owe to the results of the medium-term elections in the United States. At this point, a failure for Donald Trump (eg the loss of the Senate) is felt, because the Democrats could probably be postponed. That is why Trump & # 39; s tax cuts continue and the large American infrastructure renewal project has been blocked.
The RiskHedge Report & # 39; According to the statistics published by the website, published by Marketwatch since 1946 on Tuesday, there were 18 "midterm exams" and the US elections increased every 12 months following each of these elections! And since the average has reached an increase 32 17% in 12 months and even 32%, the lowest "midterm exams" of the year if we accept as reference …
However, other statistics moderate this optimism: According to Fundstrat Global Advisors, which has worked in the markets since 1896, the average market increase was only 1.9% when the president lost the party. The majority in the House of Representatives (the most likely assumption for Trump). When the president's party held the majority at home, the increase in the 12 months after the election was about 17%.
The great fear of the trade war between Washington and Beijing
Beyond the elections, the Fed's monetary policy and profit expectations, the stock market developments, will continue to be driven in the coming weeks by trade negotiations between the United States and China. In the event of a failure to lead a major trade war, the stock markets will undoubtedly be significantly reduced, as the US and global economies are likely to suffer. pauses in the monetary tightening cycle.
The latest echoes from China also seem to point to a desire to reach an agreement from Washington. US President Donald Trump will meet his Chinese counterpart, Xi Jinping, at the end of the month in Argentina at the G20 summit in Buenos Aires.
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