A key input in this model is the ISM index and the ma­nu­fac­tu­ring PMIs

US Economy: The Biggest Risk Is Future Declines In Profits

Wall Street.
Wall Street.

Morgan Stanley | In reality, du­ring H1 2022 the market was al­ready dis­coun­ting the FED and the toug­he­ning of fi­nan­cial con­di­tions. So we do not see the FED as an ad­di­tional risk: the big­gest risk we see is the de­clines in fu­ture pro­fits.

In this respect, our advance profits’ model projects a significant drop in EPS growth over the coming months. A key input in this model is the ISM index and the manufacturing PMIs, as well as the FED’s regional manufacturing surveys, all of which point to declines in the ISM.

At the same time, the exchange rate in the revisions of profits are giving bearish signals. On the other hand, the spread between the future growth in sales and the exchange rate of the PPI, as well as the spread between the growth in nominal GDP and the growth in wages suggest pressure on margins and profits.

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