Are Stock Bears ‘Vindicated’?
"Somewhat vindicated."
That's how one mainstream financial media outlet described the persistently bearish view harbored by Morgan Stanley's Mike Wilson, who still thinks earnings estimates are too optimistic for Q4 and next year.
"Vindicated," "somewhat" or otherwise, might be a stretch absent a steeper slide for US equities. The S&P is still above Wilson's year-end target, and although corporate America did succumb to a profit recession tied in part to negative operating leverage, I thin
US equities are currently owned as follows, with the trend from 2008, as follows (from yardeni.com). The percentages don’t total 100% on the Yardeni graph-but this gives an idea of current ownership, by group, and which groups are buying, selling and holding over the last 15 years:
Households, including non-profit- 41%; rising from 37-38% in 08.
Mutual funds/ETFs- 26%;declining from 29% in 08.
Institutions (insurance, pension and government retirement funds)- 11%, declining from 15% in 08.
Rest of the world- 17%, rising from 15% in 08.
If US equities are going to continue to do well, one factor will be that foreign demand keeps up. Although I can’t think of another global economy that would be better to store wealth in (than the US), it would help if the US solved some governance, social and economic problems currently facing our country and our economy.
Hopefully Xi continues to stay in office and continues to be “Xi”, because if another leader is less autocratic and welcomes democracy, capitalism and free trade in China, the US will no longer receive a “pass” for poor behavior.