A good piece of research here out of JP Morgan
citing the 6 risks to the markets in the near-term. Point 6 has the
potential to become particularly worrisome as we move into earnings
season over the next few months. The current earnings are likely to be
relatively strong once again, but the outlooks going forward are almost
certain to be tempered given the recent uncertainty abroad. Plus, I’d
say the odds of a profits recession in 2013 are increasingly high.
Here’s JP Morgan:
1. Global macro momentum continues to weaken. Composite PMIs are now down for 3 months in a row. Cyclicals have further downside from here.
2. Eurozone remains a big concern. This
is the one area where most are bearish already, but we would
notunderestimate the ability of Euro policymakers and of Euro activity
to underwhelm even the low expectations. We expect further downside to
Euro dataflow. M1 suggests Euro PMIs could be as low as 40 by September.
3. We encounter complacency on the US.
Most still believe ’12 will not be a repeat of ’11, but US EASI is
negative and making new lows. Historically, the market did poorly in the
aftermath of this. S&P500 fell 16% in the summer of ’10, 19% in
summer of ‘11 vs “only” 10% so far.
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