Macro Research Maintain 2.5 Stars on US equities: Aggressive | FSMOne SG - Research Highlights

Macro Research

Maintain 2.5 Stars on US equities: Aggressive rate hikes might put the US on a recessionary path

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• US equities have gotten off to a rocky start in 2022. At the midway point of the year, the S&P 500 index is already in bear market territory, while inflation continues to be red hot.

• We fear that the Fed’s aggressive response to tackle inflation might lead to a sudden tightening of financial conditions, which could put the US on a recessionary path.

• Higher prices, negative real wages, and lower savings all point to waning consumer spending, which should negatively affect economic growth.

• Even though GDP estimates for 2022 have been revised down significantly, earnings are still expected to grow 15% year-over-year. Earnings estimates are likely to be overly optimistic and thus we expect more downward revisions to come.

• We maintain a 2.5 Stars “Neutral” rating for US equities. Investors who are still keen to remain in the US equity space may want to consider adopting a value tilt.

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: JPMorgan Funds - US Value A (acc) USD, Vanguard S&P 500 ETF (NYSE:VOO), Allspring US Large Cap Growth Fund Cl A Acc USD