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A popular valuation metric for the S&P 500’s could point to lower turns over the next few years, based on historical performance, according to Apollo’s chief economist (Apollo Chief Economist)
Investors should brace for low stock-market returns for years to come given current valuations, according to Torsten Slok, Apollo Global Management’s chief economist.
The S&P 500’s forward price-to-earnings ratio at nearly 22 “implies a 3% annualized return over the coming three years,” when looking at the historical relationship between the equity index and the valuation metric.
“In other words, when stocks are overvalued like they are today, investors should expect lower future returns,” Slok wrote in a Friday client note.
Dow futures slipped early Friday, as shares of American Express slumped in premarket trading after the company’s latest earnings failed to live up to investors’ elevated expectations. Procter & Gamble Co. shares also slumped after the company shared its results.
Meanwhile, futures tied to the S&P 500 and Nasdaq-100 continued to climb following a relatively benign batch of second-tier U.S. economic data, and strong earnings from Netflix.
Construction of new U.S. homes dipped 0.5% in September, although the numbers matched economists’ expectations.
Meanwhile, the number of new building permits approved in September came in at 1.428 million, slightly less than expected.
Donald Trump is set to win America’s elections next month in a victory that will give a boost to U.S. stock markets, Daniel Loeb’s hedge fund Third Point has said in its third quarter letter to investors.
Third Point told investors it believes Trump’s ‘America First’ policy positions will increase U.S. manufacturing and drive up infrastructure spending, in what would lift the prices of certain materials and commodities.
The hedge fund, which was started by Daniel Loeb in 1995, said Trump’s deregulatory policies will also “unleash productivity and a wave of corporate activity” in the U.S., as it said it has now positioned itself to “benefit from such a scenario.”
“Considering political developments over the past few weeks, we believe that the likelihood of a Republican victory in the White House has increased, which would have a positive impact on certain sectors and the market overall,” Third Point said.
CVS Health Corp.’s stock tumbled 10.5% early Friday, after the healthcare company announced leadership changes and lowered guidance for the fourth time this year, weighed down by challenges in its health-benefits business.
The Woonsocket, Rhode Island-based company named longtime executive David Joyner as new CEO, replacing Karen Lynch, who is stepping down. Current Chairman Roger Farah will become executive chair, the company said, confirming an earlier story in the Wall Street Journal.
CVS also offered guidance for third-quarter GAAP per-share earnings of 3 cents to 8 cents, and for adjusted EPS of $1.05 to $1.10. That’s well below the FactSet consensus of $1.69. The company is slated to report earnings on Nov. 6.
Equities may be choppy over the next few weeks, say strategists at Barclays.
The worst drawdowns come in October, they note.
Barclays says its own analysis of implied moves around elections, and S&P 500 performance in election vs. non-election years, indicates that seasonality and not the election is the key driver.
“We would point out that the busiest weeks of 3Q24 earnings are also waiting in the wings, and with valuations high, implied moves elevated and revisions sharply negative, U.S. equities could be in for a choppy ride until October is in the rear view,” they say.
In early premarket trade, Netflix shares jumped 5% — basically levelling out the stock from where it was when the week began.
JPMorgan analysts say their bull thesis is supported by double-digit revenue growth in 2025 and 2026, continued margin expansion while increasing investment, ramping cash flow, a strong streaming leadership position and a potential to become global TV.
Chinese stocks rallied Friday for the first time in four days as the central bank rolled out promised support for the stock market.
China’s CSI 300 jumped 3.6% to 3925.23, and the index is now 22% above levels from late September when the Chinese government first announced a stimulus plan.
The Hang Seng also closed up 3.6%. Chipmaker SMIC was among the companies that rallied, as several microchip names jumped in Shanghai trade.
How are stock-index futures trading:
S&P 500 futures increased 4 points, or 0.07%
Dow Jones Industrial Average futures fell 30 points, or 0.07%
Nasdaq 100 futures increased 60.5 points, or 0.29%
On Thursday, the Dow Jones Industrial Average rose 161 points, or 0.37%, to 43,239, the S&P 500 declined 1 point, or 0.02%, to 5,841, and the Nasdaq Composite gained 7 points, or 0.04%, to 18,374.
Stock futures on Friday indicated markets will continue trading around record highs following a strong set of results from Taiwan Semiconductor Manufacturing Co. on Thursday and the European Central Bank’s 25 basis point interest rate cut.
TSMC’s results, in which it reported a 54% increase in its third quarter profits, helped lift markets in the U.S. and Asia while giving a 3% boost to Nvidia. The ECB’s interest cut, in turn, paved the way for the start of an easing cycle that is now expected to see a series of back-to-back rate cuts.
Investors, meanwhile, pared back bets the Federal Reserve will follow in the ECB’s footsteps with markets now predicting America’s central bank will pause its interest rate cuts in at least one of their meetings within the next six months.
Israel on Thursday also reported its forces had killed Hamas leader Yahya Sinwar, in news that buoyed gold on Thursday and is providing support again on Friday. Israel still yet to respond to strikes made by Iran at the start of October.
Investors on Friday will now be waiting for September data from the U.S. on housing starts and building permits while tuning into Federal Reserve Governor Christopher Waller speech in Vienna. American Express, Procter & Gamble, and Schlumberger are all on Friday set to publish financial results.
