Optimistic investors are rallying U.S. stocks, but should be wary of moves to “fight the Fed,” reports Lisa Shalett, chief investment officer for wealth management at Morgan Stanley. ing.
the economic outlook is blurry
“Some investors are hopeful that China’s economic recovery will save the United States. , which in turn could put pressure on asset prices.”
Corporate Earnings Remain Weak
“U.S. nominal GDP has hovered between 9% and 14% over the past 10 quarters, versus the long-term trend of 4% to 5%, and the S&P 500 operating margin has averaged 14.5% versus its 25-year average. ~ 16.5% 12.5% The tendency of performance to return to long-term averages can lead to a negative change in year-over-year earnings growth, known as the ‘earnings recession’. ”
Labor Market Strength Continues
“A resilient job market could help the economy achieve a ‘soft landing’ if strong real wages support consumption. The conundrum, however, is that strong wages and spending will likely increase inflationary pressures, offering little reason or incentive for the Fed to cut rates. ”