“We need to see inflation begin to cool off before we can have a sustained rebound,” said David Lebovitz, who helps oversee $2.6 trillion in assets as global market strategist at JPMorgan Asset Management.
Analysts now forecast earnings for growth companies will rise 1.4% in 2022, down from the 5.8% pace that had been expected in April, according to Bloomberg Intelligence. Consensus expectations for so-called value companies, which sell at a relatively low multiple of profit or book value, have risen over the same period.
At the same time, investors remain optimistic about the long-term prospects for tech, even in a weaker macroeconomic backdrop, and the market’s rout has eased concerns about valuations. The Nasdaq 100 is trading at about 18.8 times estimated earnings, below its 10-year average multiple of 20, while industry bellwethers like Alphabet, Amazon, Meta and Salesforce Inc. are all below their long-term averages.
“High-multiple stocks still don’t look like the place to be, but if you have defensive growth businesses where the multiple is in line with the historical trend, that looks like a nice fat pitch from the market,” said Winslow Capital’s Kelly.
If Meta Platforms was hoping that its new ticker symbol would help investors forget about the months of weakness in the stock, that plan hasn’t worked out so far. The stock slumped in each of the three trading days since it started trading as META, and the more than 16% slump over that stretch represents its biggest three-day drop since February. The stock also closed Monday at the lowest since April 2020.
This article was provided by Bloomberg News.