Short alarms are frequently sounded, will the US stock market be fine in 2023?

　　Securities Times reporter Wang Rui

　　In the face of the falling US stocks, the warning voice from Wall Street has become louder and louder.

　　As of the close on December 19, U.S. time, the Dow Jones Industrial Average fell 0.49%, hitting a new low in January; the S&P 500 Index fell 0.90%; the Nasdaq Composite Index fell 1.49%.

This is the fourth consecutive trading day for U.S. stocks to fall, and the entire Wall Street is clouded.

　　On the same day, Mike Wilson, a big bear on Wall Street and chief strategist at Morgan Stanley, warned investors that the recent sell-off in U.S. stocks is more about the stock market’s outlook for the coming earnings recession.

He judged that the future trend of U.S. stocks "may be similar to what happened in 2008-2009," or trigger new lows in U.S. stocks. Compared with the last financial crisis, the Fed's hands and feet are more restrained, and it may sit idly by the decline in earnings.

　　Combining the main points of view of international investment banks and domestic securities firms, it can be found that institutions generally believe that the current pricing of US stocks has not yet reflected downward earnings expectations, and there will be a wave of "performance killing" in the first quarter of next year.

After that, though, U.S. stocks are poised to resume their gains as the Fed peaks in rate hikes and may shift to cuts.

　　Wall Street bearish warning

　　Mike Wilson said on December 19 that U.S. stocks will usher in the worst year since the global financial crisis, and corporate profits will suffer the same fate.

He believes that the upcoming corporate earnings recession "could be similar to the situation in 2008-2009", which may send the stock market to new lows, and the results will be "much worse than most investors expect."

　　The analyst had accurately predicted the sell-off in U.S. stocks at the beginning of this year and announced a temporary long position in October.

Earlier this month, he turned his guns around again, arguing that the rebound in U.S. stocks since October is over and recommending investors take profits.

In his view, the recent signs of weakness in the U.S. economy are really worrying, even though inflation has begun to fall from historical highs.

　　According to the forecast of the Morgan Stanley team, the earnings per share of US stocks in 2023 will be US$180, which is far lower than the US$231 generally expected by the market.

Considering that the current equity risk premium is lower than in August 2008, but the valuation is higher, it is expected that the S & P 500 index may fall to 3000 points next year, which means that it still needs to fall more than 10% from the closing point on December 19 20%.

　　Keith Parker, head of US and global equity strategy at UBS, also pointed out in his latest view that the US economy will experience a recession in the second quarter of 2023, so next year is basically easing inflation and financial conditions between the upcoming growth and earnings shocks. competition between.

But he also predicts that the Federal Reserve will cut interest rates sharply in the third quarter, and then the US stock market will start to recover. By the end of 2023, the S&P 500 index will reach 3,900 points.

　　Strategists at Goldman Sachs are also wary of downside risks for U.S. stocks.

Goldman Sachs Research recently pointed out in a research report that although many stock markets around the world are undervalued, the valuation of US stocks is still at the peak level of the technology bubble in the late 1990s.

Even taking into account the market's more optimistic view of U.S. economic growth and the different overall composition of public companies, this particular performance remains difficult to explain, especially "in the face of pressure on profit margins of large technology companies, resulting in layoffs and investment declines."

　　According to the forecast of Goldman Sachs Research Department, due to the impact of fiscal austerity and a sharp rise in inflation, the inflation-adjusted real personal income of the US economy is currently picking up and is expected to grow at a rate of more than 3% next year.

Based on the above, the United States may narrowly avoid a recession.

Even so, the risk of investors pricing in a heightened likelihood of a U.S. recession before stocks bottom is high, so the base case assumes flat earnings in 2023.

　　U.S. stock earnings under pressure

　　How will pessimistic US economic growth expectations affect US stock performance?

　　Song Xuetao, chief macro analyst at Tianfeng Securities Research Institute, said that since the most accurate indicator for predicting recession—the 10-year and 3-month U.S. debt has been inverted, there is a high probability that the U.S. economy will experience a recession (not necessarily a deep recession) in 2023.

As long as the Federal Reserve can stop raising interest rates in the first quarter to avoid further deepening of the inversion, solid business and household fundamentals can prevent the economy from falling into a deep recession.

　　Specific to the three aspects of sales revenue, profit margin and repurchase, Song Xuetao predicts that next year, the growth rate of US corporate income will have a slight positive growth of 2%, and the corporate profit margin will continue to fall to 11.8%. The weakening of corporate repurchase will continue to be a drag. EPS growth rate may drop to -5%.

Although there will be no deep recession in U.S. stock performance next year, there is still a large downside compared to the current market expectation of 5.5%. It is judged that U.S. stocks still have no allocation value in the short term.

　　"Before the U.S. monetary policy turns in the past, most of the markets will send signals a long time earlier than the Fed." When interpreting the Fed's December meeting recently, You Chunye, chief macro analyst at Pacific Securities, mentioned that although Fed Chairman Powell's remarks were relatively hawkish , But the subsequent market performance clearly believes that the Fed's high interest rates will not be sustainable.

It is expected that the Federal Reserve will continue to raise interest rates in the first quarter of next year, but it is expected to stop in the second quarter, and it is very likely to turn to lower interest rates in the second half of the year.

　　You Chunye believes that the previous rise and fall of U.S. stocks mainly reflected the market’s game against the Federal Reserve’s monetary policy, but the pressure on the profit side brought about by the future economic downturn was insufficiently priced.

As more and more U.S. economic indicators begin to show "red lights", the U.S. stock market will gradually come under pressure from the profit side in the future, which will bring the risk of a double dip to U.S. stocks.

　　Wang Yihan, an overseas strategic analyst at CITIC Securities, also mentioned in his outlook on the U.S. stock market in 2023 that from now until the first quarter of next year, the Fed’s continued monetary tightening is expected to push U.S. stocks into the expected stage of trading recession, and the market will fluctuate downward.

In the second quarter, U.S. stocks are expected to enter the "first half" of the recession cycle. As the U.S. economy enters recession or market recession expectations intensify, U.S. stock earnings may be further revised down.

The current profit and revenue growth forecasts for the S&P 500 in 2023 are 0.9% and 2.9%, respectively, almost zero growth.

　　However, he also said that in the "second half" of the recession cycle, monetary easing and expectations of the end of the recession are expected to drive U.S. stocks to start a rally.

Especially since 2015, the U.S. stock market structure has gradually shifted to be dominated by growth sectors, making U.S. stocks more benefit from the expectation of loose liquidity.

At that time, you can pay attention to the technology leaders that benefit from the expected warming of liquidity, and the financial sector that benefits from the expected strengthening of economic recovery.

　　US stock IPO is in the cold winter

　　It should be noted that the downturn in the US stock secondary market has also dragged the IPO market into ice water.

　　Wind data shows that in the first three quarters of 2022, there were 169 IPOs in the U.S. stock market based on the statistics of the three major U.S. exchanges, a year-on-year decrease of 77.88%, with an average of only 19 cases per month, compared with the average number of IPO projects per month in the same period last year. From 85.

The total amount of financing was US$20.1 billion, a year-on-year decrease of 91.93%; and the volume of IPOs was generally small, most of which were less than US$50 million.

　　In terms of SPACs, in the first three quarters, there were 78 SPAC listings on US stocks, with a total financing of US$12.8 billion, which was significantly lower than the same period last year.

At the same time, the uncertain factors of overseas regulation have slowed down the pace of Chinese companies going public in the US. Since the beginning of 2022, only 14 Chinese concept stocks have been listed in the US.

　　Another problem that cannot be ignored is that even if they are successfully listed against the downturn in the market, many new stocks are now facing huge pressure on stock prices.

Wind data shows that among the 435 new stocks listed on the US stock market in 2022, a total of 38 are currently priced at no higher than $1; if the relaxation is relaxed to $2, 84 new stocks are in danger—the stock price has been below $1 for a long time. USD, which is likely to trigger a delisting notice from the exchange.

　　However, just last week, there were signs of easing the delisting risk of U.S. and Chinese concept stocks. This may be good news for Chinese companies to retain their listing status in the U.S. and resume listing in the U.S.

On December 15, the U.S. Public Company Accounting Oversight Board (PCAOB) announced that it can complete inspections and investigations of accounting firms in mainland China and Hong Kong, China in 2022, and revoke the identification of related firms in 2021. Market risks are temporarily eased.

　　Wang Zhengzhi, chief analyst of new shares of Guotai Junan Securities, said that in the early stage of US stocks, many Chinese companies were attracted to go public due to their advantages such as perfect market hierarchy, diverse listing standards and short listing cycle.

As the regulatory environment for Chinese concept stocks has become stricter, the number of delistings has increased significantly, and Chinese concept stocks have entered a cold winter.

Whether the audit papers can be obtained independently by the US is the core of the differences between China and the US. The issue of sovereignty and confidentiality requirements have caused disputes between the two sides in cross-border regulatory cooperation. Whether an agreement can be reached on this issue is the key to the smooth progress of cooperation.

In December 2022, the two parties reached a preliminary cooperation on audit supervision, and further cooperation needs to be closely watched.