Capex
Bulls and bears have capitulated, and the majority of the clients surveyed expect a rangebound market in the near term. Our fair value PE NTM indicates that the S&P 500 is only modestly overvalued. The continued outperformance of the Magnificent Seven faces multiple hurdles. Meanwhile, fiscal spending is unlikely to create an impetus for another leg up in equity performance.
The ECB is done lifting interest rate for the cycle and its next move will be a cut next year. Yet, European rates will climb even higher in the second half of the decade.
Stocks should continue to rally in the near term, but investors should prepare to turn more defensive towards the end of the year in advance of a recession in 2024.
The US is not out of the woods when it comes to inflation, which means that it is too early to conclude that the Fed can stop raising rates. Any further increase in inflation risk would prompt us to turn more cautious on stocks.
