Mike Wilson: New Data Sends Concerning Signs for U.S. Stocks
Thoughts on the Market
Morgan Stanley
4.8 • 1.4K Ratings
🗓️ 3 September 2019
⏱️ 4 minutes
🧾️ Download transcript
Summary
On today's podcast, Chief Investment Officer Mike Wilson says a popular narrative forecasted a rebound for the second half of 2019. However, new data on lower U.S. factory activity could counter that expectation.
Transcript
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| 0:00.0 | Welcome to the thoughts on the market. I'm Mike Wilson, Chief Investment |
| 0:05.6 | Officer and Chief U.S. Equity Strategist for Morgan Stanley. All of my |
| 0:09.0 | colleagues bringing you a variety of perspectives I'll be talking about the |
| 0:12.0 | latest trends in the financial marketplace. |
| 0:14.0 | It's Tuesday, September 3rd at noon, so let's get after it. |
| 0:17.0 | In the first quarter the popular narrative used to explain and justify the sharp rally in stocks |
| 0:22.0 | was that the global economy was bottoming and |
| 0:24.4 | would re-accelerate in the second half of the year. |
| 0:26.7 | That story rested on hopes for more fiscal stimulus from China, a resilient U.S. economy that still |
| 0:31.6 | had legs from the tax cuts, and robust corporate profits |
| 0:34.4 | that would lead to more capital spending, hiring, and wage growth for the consumer. |
| 0:38.7 | We disagree with that narrative, suggesting the global economy would likely not bottom in the first quarter as China did less than expected on the fiscal front and the US economy came under pressure from weaker U.S. corporate profits. |
| 0:50.0 | We argued that corporate profits would disappoint and therefore so would capital spending and eventually other corporate activity affecting the economy, including hiring and wage increases. |
| 0:59.4 | We were also skeptical that a trade deal with China would be achieved and that would only further way on corporate confidence. |
| 1:05.4 | Fast forward to today and it's safe to say that the global economy has disappointed most expectations this year. |
| 1:10.8 | Meanwhile, U.S. corporate profits and capital spending have disappointed this year, too. |
| 1:15.0 | Despite these twin headwinds, the U.S. economy remains okay with GDP growing slightly above 2 percent, |
| 1:20.4 | thanks to a resilient U.S. consumer. |
| 1:22.4 | Since last October, I've been steadfast in my call for a U.S. Profits recession this year and skeptical of a big second half recovery. |
| 1:29.0 | Now is second quarter earning season throwing cold water on the second half recovery and |
| 1:33.2 | profits, S&P 500 third quarter EPS expectations are down to negative 2.5 |
| 1:38.4 | percent, well below the half a percentage growth in the first half of this year. |
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