“Jerome Powell [Fed Chairman] would do well to keep all options open and avoid making a clear statement this Friday at the central bankers meeting in Jackson Hole,” warns Yves Bonzon, CIO of Julius Baer.

The risk of correction in the stock markets is high with Wall Street at historical highs and Europe, of the year, and any interpretable message about the greater or lesser intensity of tapering (withdrawal of monetary stimuli) in the United States ? discounted either in September, in November, or even this weekend ?? it could serve as an excuse for widespread profit-taking.

At the moment, neither the impact of the Covid Delta variant on the economic recovery, nor the regulatory threat in China, especially regarding technology companies, not even the different information on the end of the Federal Reserve’s debt purchases ( Fed) due to inflation and the improvement in the labor market have been sufficient reasons to trigger a correction in the main Wall Streey and Old Continent indices, which have risen by about 40% since the price of the company began trading at the end of October 2020. coronavirus vaccine with Pfizer’s announcement of its treatment as the main milestone in early November ??.

Precisely, the acceleration of the reconstruction in the real economy after the pandemic has allowed vaccination, together with fiscal stimuli, to the point that a withdrawal of monetary support in the United States is effectively expected – the Western power with the cycle more advanced ?? for the next few months, which would conclude with the rise in reference interest rates.

A recovery that, at a microeconomic level, is evident in the latest benefits presented by listed companies on both sides of the Atlantic, and also in those expected for 2021 and 2022.

Some gains that justify the increases in the stock markets and that limit a possible correction to around 10%, if the PER ratio is taken into account, which measures the times that the benefits are collected in the price of the shares ?? and in its case of the companies present in the indices as a whole ??, of the Wall Street benchmark, the S&P 500.

The US selective currently presents a profit multiplier of 22.5 times if the estimates for 2021 are taken into account and and of 20.5 times if the forecasts for 2022 are taken (see graph). When the vaccine began to trade, the PER was 20 times, up to where this ratio would justify a profit collection if a message is misinterpreted in Jackson Hole.

The Ibex, without overbought
The risk is somewhat higher for the technological Nasdaq 100, although it would be explained only by its high growth profile, according to the same analysis, and it is similar for the EuroStoxx 50.

While, in the Ibex 35 there would be no risk, that is, there would be no Overbought according to the profit expectations for this year and the next, which would have a good argument in the lowest recovery since the March 2020 lows , but its dependence on international references is irremediable.

“Companies are optimistic about the financial health of their clients: in general, they trust their ability to pass on the rise in prices, thanks in part to excess household savings,” says Álvaro Cabeza, an expert at UBS AM Iberia.

“The demand from companies is favored by the current high levels of activity, the need to replenish inventories that were reduced during the first phase of the recovery and the impossibility of doing so in some cases due to supply constraints,” Add.

“Concerns about equity valuations and the housing market conflict with reports on the lack of supply of credit to small businesses and, most prominently in the latest comments from the Fed, downside risks to the economy due to the Delta variant of the coronavirus, “observes Julius Baer’s Yves Bonzon. “The latter is becoming more visible every day: high-frequency data on air traffic or restaurant reservations is declining as US consumers become more cautious again,” he concludes.

Almost full of positive surprises
94% of the Nasdaq 100 technology companies that have presented their results for the second quarter of 2021 beat analysts’ expectations. Without a doubt, it is a sign of strength, which is repeated in most exchanges, although in a less overwhelming way.

“Corporate plans are particularly important at this stage: as fiscal policy becomes less expansive, a solid shift from public to private growth is needed,” says Álvaro Cabeza, from UBS AM Iberia.

By Rak Esh

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