Caution Abounds in Equities: Declining Buybacks and Prolonged Earnings Downgrades Cast Shadows on Stock Market

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The current VIX level of 13 reflects a hesitancy among investors to take a bearish stance on the prominent Big 7 stocks. Global corporate buybacks, on a downward trajectory since 2019 despite heightened volatility in inflation and interest rates, may indicate a erosion of savings. As downgrades to U.S. earnings estimates persist for nine consecutive weeks, the longest streak since February, concerns about the sustainability of equities are underscored. Citi’s projection aligns with Goldman’s analysis, suggesting a potential decline in buybacks this year before a modest rebound in 2024. Despite short-term optimism, Deutsche Bank highlights the ongoing decline in earnings expectations for 2024, raising questions about the long-term support for U.S. stocks.

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Big Money Managers Warn: Recent U.S. Market Surge May Be Temporary

Big money managers view the recent uptick in U.S. stocks and bonds as a fleeting rally, overshadowed by looming concerns about fiscal and monetary policies, the 2024 presidential election, and potential recession. The market’s optimism is countered by fears of the negative impacts of Federal Reserve’s interest rate hikes and a global economic slowdown, leading to a cautious outlook for the coming year with expectations of minimal growth in major indices like the S&P 500.

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