Goldman Sachs’ Christian Johnson and Citi’s Tony Osmond are united in their views on the forces driving the “incredible shrinking ASX”.AUD +0.1% to 66.18 US centsIn New York: BHP -1.5% Rio -0.4% Atlassian -0.3%Spot gold +0.7% to $US1961.33/oz at 2.42pm in New York10-year yield: US 3.68% Australia 3.76% Germany 2.37%P 500, Bank of America’s Stephen Suttmeier said last week’s move higher in the benchmark index points to a potential high in the 4500s.
Morgan Stanley’s Mike Wilson remains sceptical. “Hotter but shorter cycles persist — we continue to forecast an earnings recession this year that we don’t think is priced, followed by a sharp EPS rebound in 2024/2025.” Wilson also said: “In June 2024, we forecast a 17.6x P/E multiple on forward next 12-month EPS of $US239, which equates to a 4200 price target 12 months from today. We have not changed our base case SHowever, Wilson said he has pared his EPS forecast for 2023 to $US185 from $US195; that puts Morgan Stanley at 17 per cent below consensus.
“At current valuation levels, we believe that the equity market is optimistically discounting both Fed rate cuts in 2023 and durable growth. We view the likelihood of those outcomes playing out simultaneously as low. Finally, raising the debt ceiling could decrease market liquidity materially based on the substantial Treasury issuance our rate strategists expect over the next several months.”