20230907-东吴证券国际经纪-Monthly_Outlook_202309__US_Corporate_Earnings_Set_to_Rebound__Hiring_Cost_Is_the_Biggest_Risk_14页_1mb

Summary of Monthly Outlook 202309 Equity Research

The report analyzes market expectations and uncertainties for US corporate earnings and stock performance. The core thesis is that US corporate earnings are expected to rebound starting from the third quarter of 2023, with earnings bottoming out afterward, based on current consensus forecasts. Key factors driving this optimism include a significant decline in cost inflation from 2021 and 2022, as companies have successfully passed inflation to consumers through cost adjustments. Market data shows EPS estimates for S&P 500 companies increased by 0.4% for Q3 2023, led by sectors like Consumer Discretionary, Communication Services, and Information Technology.

However, high labor and capital costs pose major risks. Labor shortages and an aging population have strengthened worker bargaining power, potentially increasing expenses. Real interest rates are rising, reducing the appeal of risky assets and affecting company profitability. The Fed's policy stance may separate rate hikes and asset reduction (QT), likely continuing QT post-hiking cycle, which could further strain market conditions.

Recommendations include overweighting consumer staples due to rising EPS estimates and stable demand, while carefully selecting tech stocks with strong earnings support, particularly AI leaders. The report advises monitoring labor costs for potential relief.

Risks outlined are sharp increases in US labor costs, which could lower earnings; rising real rates pressuring risky assets; higher capital costs hindering business growth; and potential market turmoil from Fed's revision of real interest rate guidance.