Amidst the ongoing fourth-quarter earnings season, S&P 500 companies are delivering subdued results and cautious forward guidance, as per insights from JPMorgan equity strategists.
This assessment is based on the early reporting of 6% of companies, predominantly from the banking sector, with additional representation from consumer and industrial names.
While 66% of these companies surpassed earnings expectations, the optimism is dampened by the questionable quality of these outcomes, as only 50% are exceeding revenue projections.
Strategists also highlighted that stocks are witnessing underperformance post-earnings announcements.
For consumer-focused companies, attention is drawn to addressing diminishing household savings and liquidity concerns. The divergence in spending patterns between lower and higher-income segments is a noteworthy trend.
Moreover, JPMorgan highlights the risks associated with decelerating growth in Asia/China for global consumer brands.
“Results from other important global companies, such as Fedex and Delta, are challenging the cyclical resurgence thesis,” the strategists said.
“As for Tech and AI more broadly, these stocks are at risk of de-rating if the costly capital investments do not yield the promised incremental earnings stream or productivity boost in coming quarters.”
Overall, the strategists noted that the stock market is “facing a high bar” when it comes to the ongoing earnings season.
“Anything short of strong corporate guidance re-affirming current high growth expectations is likely to be penalized,” JPMorgan strategists concluded.