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‘We Think The Die Has Been Cast’: Why One Bank Just Cut Their 2019 S&P Target
Since the 2s5s inversion earlier this month, we've variously suggested that market participants might be talking America into a recession or otherwise forgetting about their own role in shaping the story that the bond market is supposedly "telling".
The inversions in the 2s5s and 3s5s played out during an extremely manic week that started with a G20 relief rally on Monday, December 3, and proceeded to feature all manner of chaos, including multiple flash crashes/fragility events, en masse stop
I was reading and thinking “a strategist might just give a really low earnings estimate and target” which would be extremely rare. So i am thinking he is going to say $140 in 2019 SP500 earnings and a 2100 target as he sounded so dire. Nope. A $7 cut in earnings and a 400 pt cut in target. So massive multiple contraction. So it highlights the previous over optimistic stance ( 3079 not 3078 or 3081) and $173 in earnings. This is the problem with Wall Street and strategists. Clouded by past and current performance, always on the optimistic side (because they are the “sell side” and most investors don’t short). Then he cuts his estimate $7. Are you kidding??? The market seems to be pricing in a much lower number ( if this is really well thought out and focused on fundamentals rather that just pure panic). On the way up everyone looked at everyone else to justify their stance and now it is in reverse. Look at the data don’t look at how bipolar market participants interpret the data. If sentiment is too bullish and valuations are too high (stocks or bonds) then pull in risk and when the opposite think of doing the opposite . Are 10yrs or corps really cheap and under owned here? How about this summer or last year? Are stocks? Individuals have the advantage of Buffett, they don’t have to swing at every pitch or perform in short calendar bursts. If a great defensible company is cheap you can take advantage of wall streets bouts of manic depressive moments. Sure markets will affect the economy through psychology, cost of capital etc but great companies maneuver through that and come out stronger. And look at the balance sheet not just the income statement.