Latest news with #JulianEmanuel
Business Times
2 days ago
- Business
- Business Times
A data deluge brings a ‘moment of truth' for markets this week
[NEW YORK] Wall Street pros are staring down a pivotal week that will likely set the tone for the rest of the year in markets and the economy. First and foremost is the conclusion of the US Federal Reserve's meeting on Wednesday (Jul 30), and although it is not expected to cut interest rates, traders and investors will be poring over commentary for clues about the path ahead. Then there's a string of Big Tech earnings with Apple, Meta Platforms and Microsoft all reporting. And sprinkled throughout are some of the leading indicators on the state of the economy, from gross domestic product to nonfarm payrolls. In other words, if there ever was a five-day stretch that would define the second half of the year, this is it. 'This week's packed calendar, trade negotiations, the FOMC, the jobs report and four of the Magnificent Seven names reporting, makes it truly a moment of truth for markets,' said Julian Emanuel, chief equity and quantitative strategist at Evercore ISI. He was referring to the Federal Open Market Committee, the panel within the Fed that sets interest rates. The fire hose of releases will test investors' faith in the resilience of the US economy and the stock market's seemingly unstoppable rise. And with US President Donald Trump's self-imposed tariff deadline of Aug 1, which he's said will not be extended, markets are hoping for some sense of stability on trade negotiations after months of whiplash. 'I think there is more of a chance of markets getting clarity on the continued resilience of the economy, while we get less clarity on the trade front,' said Kevin Gordon, senior investment strategist for Charles Schwab. ''Reciprocal tariff' deadlines are staggered for some of our largest partners, and there are still lingering questions around already-announced deal frameworks, so I don't think of Aug 1 as some magical date on which we will stop being gripped by tariff anxiety.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up S&P 500 companies are generally beating forecasts and profits are up 4.5 per cent from this time a year ago, according to Bloomberg Intelligence data. Firms such as Southwest Airlines, which said tariffs shaved US$1 billion from its annual pre-tax profit this year, expect to see improvements in the second half. 'We already see signs that demand is coming back in volumes,' chief executive officer Bob Jordan said. Much of the earnings strength is being driven by wealthier customers. American Airlines Group highlighted strength in their premium cabin demand, while Deckers Outdoor cited pricey shoes such as Ugg sheepskin boots and Hoka sneakers. United Airlines Holdings and Delta Air Lines, said corporate travel was leading their rebounds. On the flip side, Chipotle Mexican Grill cut its guidance because the 'lower-income consumer is under pressure', chief executive officer Scott Boatwright said, which has led to a drop in spending. There are other signs of stress, with companies such as Conagra Brands and Abbott Laboratories discussing higher costs due to tariffs. In particular, consumer discretionary stocks are expected to see profit declines into the start of 2026 as trade policies start to bite, Bloomberg Intelligence strategists Gina Martin Adams and Michael Casper warn. 'We already have some corporate commentary as to what effect tariffs are having and will at an individual level,' said Dan Greenhaus, chief economist and market strategist at Solus Alternative Asset Management. 'But the truth is, we probably need several more months before having a firmer handle on the cost distribution.' Economic uncertainty Economic data has also been uneven as the tariff impact is just starting to hit. The government's initial estimate of second-quarter GDP is expected to show a notable rebound in growth after a monumental surge in imports caused a contraction at the start of the year. 'It won't be until after the market and economy have had an opportunity to digest the new tariff rates that become effective on Friday that we will know where we stand,' said Michael O'Rourke, chief market strategist at JonesTrading. Other reports due this week may point to some softening in the economy. Economists expect consumer spending barely grew in June after adjusting for inflation, and other estimates point to a continued slowdown in hiring and an uptick in unemployment. They are also projecting an acceleration in the Fed's preferred measure of inflation, the personal consumption expenditures price index, as tariffs start to hit. 'It's not the cliff that most people are always looking for when it comes to an economic downturn, but it is a visible slowdown if you take the time to actually lift the hood and look at the underlying details,' said Gregory Daco, chief economist at EY-Parthenon. Despite all the uncertainty, the stock market is trading at record highs as fears of worst-case tariff scenarios have failed to materialise. The question is how long that can last. 'I think there are a few different factors here. First, there are signals that the labour market is holding up well, wages are growing faster than inflation – both of which supports the consumer in aggregate,' said Cayla Seder, macro multi-asset strategist at State Street. 'When it comes to the stock market, earnings have been beating a low bar, which has indicated the companies are holding up better than feared.' BLOOMBERG
Bloomberg
6 days ago
- Business
- Bloomberg
S&P 500's Next 7%-15% Is Down, Evercore's Emanuel Says
'A Pullback Would Be Healthy,' says Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, as he sees good news priced-in to individual stocks with the full impact of tariffs yet to hit markets and the US economy. (Source: Bloomberg)
Globe and Mail
21-07-2025
- Business
- Globe and Mail
Market Factors: Investors should brace for volatility as stocks enter FOMO stage
In this edition of Market Factors we start with a strategist who is certain market turmoil is ahead and offers two strategies to sidestep it. I discuss the research process for a potential investment in air conditioning and the diversion covers an alarming increase in young-onset gastrointestinal cancers. Evercore ISI strategist Julian Emanuel is certain that markets have entered the FOMO stage of the rally and that investors should brace for volatility as a result. Mr. Emanuel's Sunday research report recounted phone calls from several market veterans of Y2K and the great financial crisis asking the strategist some variation of 'is it different this time?' for markets. For legendary fund manager Sir John Templeton (who I met in Nassau by the way), this question represents the most dangerous words in investing. Mr. Emanuel's report included a paragraph of self-congratulations for accurately predicting the strong market rally from the April lows – he had identified a degree of bearishness last seen in 2008, which indicated that selling was exhausted. He's not a permabear. Mr. Emanuel believes that equities have priced in more good news than what is going to occur. His informal surveys indicate a consensus view that tariff rates will decline from here despite the August 1 deadlines and that S&P 500 earnings will exceed current estimates. The rally has more room to run, according to Evercore, but volatility is set to make investors uncomfortable on the way up. Potential tariff news, seasonality (late summer and fall historically see volatility increase) and current high valuations all make for a skittish market to year end. Mr. Emanuel expects a sharp correction of between seven and 15 per cent in the coming weeks before the S&P 500 resumes its rally. He sees historical precedent in the sell-offs of 1999 and late 2021 – both served as warnings of a deeper downdraft to come. The strategist recommends two investment strategies that are likely to outperform during the coming volatility. The first, not viable to many investors, is an options straddle on the Nasdaq 100. This involves buying a call option and a put on the index and makes money with a significant move either up or down. Basically it's a bet on volatility. The second strategy is more broadly available: buying stocks with attractively low valuations and strong upwards earnings revisions. This is very likely to beat the benchmark during periods of market upheaval. Every cycle is different. In the current case, the steepening of the U.S. yield curve after a long period of inversion wasn't followed by an economic recession as history would suggest. As Mr. Emanuel notes, however, what never changes is the constant rotation between investor greed and fear that drives equities. The M.I.T. Technology Review published In defense of air conditioning and that, combined with a near-global heat wave and a Citi conference call wherein an analyst cited the low penetration rate of AC in Europe, had me looking for ways to invest in the residential cooling sector. I started with the dominant air conditioning unit sales companies in Europe. Japanese giant Daikin Industries has a good foothold in the region but it also sells a lot in the U.S. and that revenue is under threat of tariffs. Mitsubishi Electric is also a major player but an increase in European air conditioners is unlikely to push its stock higher because the company's too big. There are private companies that sell a lot of air conditioning in the European union – Vaillant Group, Viessmann Group (which recently partnered with Carrier Global), and Robert Bosch GmbH are important examples – that aren't much use to investors. Carrier Global is, of course, the sector giant but I don't have a handle on how much Europeans hate American companies right now, or whether Carrier products will be tariffed in Europe. I decided to dig a bit deeper and discovered there were different refrigerants used in air conditioners and they are produced by different companies. The refrigerants are boringly named R-410A, R-454B, R-32 and R-22 (Freon), and made by DuPont spinoff Chemours, Honeywell International, Arkema SA, Daikin and Mexichem, among others. The older refrigerants like R-410A and R-22 are being phased out in favour of R-32 and R-454B which are shown to be less damaging to the environment. Honeywell dominates R-454B production but it's too big for the stock to ever demonstrably benefit from rising air conditioner sales. Daikin makes R-32 and was the first to adopt it for home use. The result of all my reading and listening on the topic identified Daikin as the company to watch although I would have to do a lot more work before buying the stock. I'm certainly not going to buy it in the middle of a heat wave - I'm more of a buy-snow-shovels-in-August type of investor. No transaction resulted from my research but that's usually the case. The air conditioning theme provided a typical example of the pre-buying process. My impression was that younger generations ate healthier than their elders so news that not only are gastrointestinal cancers surging among millennials and Gen Z, but also that doctors have no idea why, was an unwelcome surprise. A report from the Dana Farber Cancer Institute detailed by Gizmodo found that colorectal cancers in particular were rising more quickly than other cancers. Admittedly we're using a loose definition of younger people here – those under 50 – but the findings are disturbing. Kimmie Ng, director of the Young Onset Colorectal Cancer Center at Dana Farber, reported that pancreatic, gastric and esophageal cancers were also on the rise. Pancreatic cancer caused by the daily consumption of 75 unfiltered Player's cigarettes killed my grandfather and was a primary reason I quit smoking, and also makes me think about the rise of vaping. The relationship between heavy alcohol consumption and esophageal cancer isn't quite as strong as lung cancer and cigarettes but hard alcohol is a major risk factor for esophageal cancer. The rise in this type of cancer seems incongruous with declining alcohol consumption among younger generations. The doctors at Dana Farber suggested that more study should be done on potential links between GI cancers and obesity, sedentary behaviour and diet. Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page. Billionaire investor Ken Fisher is offering up his thoughts on whether you should own crypto Tim Shufelt on the one big advantage everyday investors have against the pros, and why dividend investing isn't all that it's made out to be A comprehensive research report from David Rosenberg on how to profit from the next chapter in AI Retail sales Thursday is the only domestic economic release of wider importance in the next week. Economists expect a month-over-month decline of 1.0 per cent for the headline number and a drop of 0.2 per cent ex-autos. Canadian National Railway Co. reports earnings on Tuesday (C$1.877 per share expected). Rogers Communications Inc. (C$1.102) posts results Wednesday followed by First Quantum Minerals Ltd. (loss of US$0.049 expected) and Waste Connections Inc. (US$1.245) on Thursday. Friday sees Teck Resources Ltd. (C$0.256), Loblaw Companies Ltd. (C$2.323) and FirstService Corp. (US$1.398) reports. In Trumpland there's an early look at U.S. manufacturing PMI for July on Thursday and preliminary durable goods results for June – a drop of 10 per cent month over month is forecasted but a flat result is predicted for the ex-transportation reading – is out Friday. U.S. earnings season is picking up steam. Drinks behemoth Coca-Cola Co. ($0.833) reports Tuesday along with health care logistics leader IQVIA Holdings Inc. ($2.776). On Wednesday we get Freeport McMoRan Inc. ($0.446), Boston Scientific Corp. ($0.725), Tesla Inc. ($0.427) and Alphabet Inc. ($2.17). The reporting schedule Thursday includes a company maybe only I care about, Keurig Dr Pepper Inc. ($0.484), because Dr Pepper is delicious and I want it to succeed. Blackstone Inc. ($1.093) is also posting results Thursday and Cadence Design systems Inc. ($1.575) reports next Monday. See our full earnings and economic calendar here
Yahoo
21-07-2025
- Business
- Yahoo
'It isn't different this time': Why one strategist sees excessive investor euphoria driving a 15% stock plunge
Investors are overly optimistic as earnings season begins, warns Evercore's Julian Emanuel. The S&P 500 is at a record high, but Emanuel predicts a 7%-15% near-term correction. Tariff negotiations and growing S&P 500 EPS have already been priced into the market, Emanuel says. Investors are optimistic as earnings season kicks off — a little too optimistic, according to Julian Emanuel, Evercore ISI's chief equity strategist. The S&P 500 notched another fresh record high on Monday, and sentiment is skyrocketing as Wall Street banks raise their year-end S&P 500 targets. However, stocks don't just go up: "Every structural bull market since the late 1990's has seen a late stage surge in capital markets activity and a period of intense investor FOMO," Emanuel wrote in a note over the weekend. Evercore is remaining cautious, with Emanuel warning of a 7%-15% correction in the coming months. Evercore's year-end target is 5,600. "FOMO has begun," Emanuel wrote. "Stocks have overdiscounted the potential for continued good news." Emanuel says old-school fund managers who lived through the dot-com bubble are now asking him the four most dangerous words in investing: Is it different this time? The question is a clear signal that FOMO has kicked in as investors become overconfident and play into the cycle of fear and greed. There's a lot of froth in the market: crypto is on a bull run as bitcoin hits all-time highs, zero days to expiration options are becoming popular among retail investors, and investors are counting on the AI story to continue carrying stocks higher. But good vibes aren't reason enough for the stock market to continue rallying. In fact, it's quite the opposite: before the dot-com bubble burst, bulls comprised 75% OF AAII sentiment survey respondents, a level never seen again since. Bullish investors point to strong economic data and an improving tariff backdrop as drivers for the stock market, but those tailwinds are largely already priced in, according to Emanuel. According to an Evercore survey, a majority of institutional investors anticipate tariff rates to come down from present levels of 22% to below 20% by September. They also expect S&P 500 EPS to rise above current levels of $264. With expectations already so elevated, it'll be difficult for economic data to continue surprising to the upside. And while there's much market volatility surrounding the idea of Fed independence and Fed Chairman Jerome Powell's future, markets are still pricing in that Powell will remain at his position by year-end. "Even if there is good news on the tariff front, it is arguably already in stock prices," Emanuel wrote. "Despite the potential for tariff induced guide-downs and the historical tendency of earnings estimates to fall at this point in the cycle, 67% of investors believe earnings estimates for 2025 will be at or above the current $264 on 9/1," Emanuel added. With a trailing price-to-earnings ratio of 24.7x, the S&P 500 is trading at the top decile of valuations since 1960. Emanuel doesn't see a market crash in the cards, as valuations haven't reached the dot-com bubble's 28x price-to-earnings ratio. A near-term pullback is Emmanuel's base case as investors overlook risks associated with ongoing tariff negotiations and the One Big Beautiful Bill posing risks to the bond market. "The asking of 'The Question' shows scant regard for near-term risks. It isn't different this time," Emanuel wrote. Read the original article on Business Insider
Business Insider
21-07-2025
- Business
- Business Insider
'It isn't different this time': Why one strategist sees excessive investor euphoria driving a 15% stock plunge
Investors are optimistic as earnings season kicks off — a little too optimistic, according to Julian Emanuel, Evercore ISI's chief equity strategist. The S&P 500 notched another fresh record high on Monday, and sentiment is skyrocketing as Wall Street banks raise their year-end S&P 500 targets. However, stocks don't just go up: "Every structural bull market since the late 1990's has seen a late stage surge in capital markets activity and a period of intense investor FOMO," Emanuel wrote in a note over the weekend. Evercore is remaining cautious, with Emanuel warning of a 7%-15% correction in the coming months. Evercore's year-end target is 5,600. "FOMO has begun," Emanuel wrote. "Stocks have overdiscounted the potential for continued good news." Emanuel says old-school fund managers who lived through the dot-com bubble are now asking him the four most dangerous words in investing: Is it different this time? The question is a clear signal that FOMO has kicked in as investors become overconfident and play into the cycle of fear and greed. There's a lot of froth in the market: crypto is on a bull run as bitcoin hits all-time highs, zero days to expiration options are becoming popular among retail investors, and investors are counting on the AI story to continue carrying stocks higher. But good vibes aren't reason enough for the stock market to continue rallying. In fact, it's quite the opposite: before the dot-com bubble burst, bulls comprised 75% OF AAII sentiment survey respondents, a level never seen again since. Bullish investors point to strong economic data and an improving tariff backdrop as drivers for the stock market, but those tailwinds are largely already priced in, according to Emanuel. According to an Evercore survey, a majority of institutional investors anticipate tariff rates to come down from present levels of 22% to below 20% by September. They also expect S&P 500 EPS to rise above current levels of $264. With expectations already so elevated, it'll be difficult for economic data to continue surprising to the upside. And while there's much market volatility surrounding the idea of Fed independence and Fed Chairman Jerome Powell 's future, markets are still pricing in that Powell will remain at his position by year-end. "Even if there is good news on the tariff front, it is arguably already in stock prices," Emanuel wrote. "Despite the potential for tariff induced guide-downs and the historical tendency of earnings estimates to fall at this point in the cycle, 67% of investors believe earnings estimates for 2025 will be at or above the current $264 on 9/1," Emanuel added. With a trailing price-to-earnings ratio of 24.7x, the S&P 500 is trading at the top decile of valuations since 1960. Emanuel doesn't see a market crash in the cards, as valuations haven't reached the dot-com bubble's 28x price-to-earnings ratio. A near-term pullback is Emmanuel's base case as investors overlook risks associated with ongoing tariff negotiations and the One Big Beautiful Bill posing risks to the bond market. "The asking of 'The Question' shows scant regard for near-term risks. It isn't different this time," Emanuel wrote.
