With first Fed cut, it's time for a changing of the guard - SG
Main U.S. indexes rally, Nasdaq up >2.5%
Tech leads S&P 500 sector gainers; utilities weakest group
Euro STOXX 600 index up >1%
Dollar off; gold, crude up >1%; bitcoin rallies ~5%
U.S. 10-Year Treasury yield rises to ~3.74%
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WITH FIRST FED CUT, IT'S TIME FOR A CHANGING OF THE GUARD - SG
After the fastest hiking cycle in 40 years, the Fed has finally embarked on a rate-cutting path.
However, according to Manish Kabra, head of U.S. equity strategy at Societe Generale (SG), every rate cutting cycle is different.
"This time, the leading credit signals are improving, the corporate sector has been deleveraging, household leverage is at its lowest in 25 years, and the large-caps profit cycle is growing," writes Kabra in a note.
He adds "Equities do not de-rate when the Fed cuts rates in such an environment. Our bubble-math shows S&P 500 at 6,666 if markets traded on ’99-00 multiples."
For 2024, after a ~20% rally, Kabra says that 10 of 10 valuation measures he tracks are expensive and, crucially, Nasdaq 100 EPS growth is slowing.
Therefore, he believes that the max returns are within U.S. stocks rather than at the index level (S&P 500 at 5,500 end’24, 5,800 end ’25).
To this end, Kabra likes the "breadth" trade, and says buy catch-up plays.
He advocates being long financials and industrials, as well as U.S. consumers - both cyclicals and defensives. In fact, SG is upgrading the consumer discretionary sector for the first time in three years.
Kabra also favors the equal-weighted S&P 500 over the Nasdaq 100 (mega-caps).
(Terence Gabriel)
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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
LARGER FED CUT RAISES RISKS FOR U.S. DOLLAR - CLICK HERE
THURSDAY DATA ROUNDUP: FED HANGOVER - CLICK HERE
WALL STREET RALLIES AS FED PIVOT SINKS IN - CLICK HERE
JEFFERIES SAYS BANKING INDUSTRY'S INTEREST INCOME IN JEOPARDY, BUT DEPOSITS COULD BE CHEAPER - CLICK HERE
NASDAQ COMPOSITE: LAND OF CONFUSION - CLICK HERE
CENBANK DIVERGENCES ENDING, APART FROM JAPAN - AMUNDI - CLICK HERE
R&D PICKS IN EUROPE - CLICK HERE
MINERS DO HEAVY LIFTING AS STOXX RISES AHEAD OF BOE - CLICK HERE
STOXX EYES JUBILANT START AFTER FED'S BUMPER CUT - CLICK HERE
UK INFLATION TO KEEP BOE ON CAUTIOUS PATH - CLICK HERE
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