Key Assessment: The fundamentals of the US stock market show no signs of a "profit recession," and the main bull market trend remains intact. Tony Pasquariello, head of hedge fund business at Goldman Sachs, predicts that S&P 500 earnings growth will slow from its highs in the coming quarters, but not collapse; this means that valuation expansion may narrow, but as long as profits continue to grow, the stock market lacks the fundamental triggers to enter a sustained bear market.
The Fed's rate hikes are more like a "slowdown." The market has already re-priced in multiple rate hikes, but long-term interest rates subsequently stabilized, and the bond market has already completed a significant portion of the tightening. The financial conditions facing the US stock market are actually more favorable than a month ago.
The biggest risk at present is a "double squeeze" on household consumption. About 70% of the US economy comes from consumption, and rising energy prices and persistently high mortgage rates are weighing on it. If gasoline prices remain high and 30-year mortgage rates remain around 7%, household disposable income will be compressed, which may ultimately be transmitted to the revenue of businesses in retail, discretionary consumption, and housing.
