Why stock-market bulls are ‘woefully myopic’ about S&P 500 profit growth --- even before the impact of a potential recession

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Why stock-market bulls are ‘woefully myopic’ about S&P 500 profit growth — even before the impact of a potential recession

Wall Street forecasts for the S&P 500 to see single-digit profit growth in 2023-24 seem “woefully myopic,” with the U.S. stock-market benchmark’s historically high operating margins being a “material risk,” according to Morgan Stanley’s wealth-management division.

“We worry that the bulls fail to analyze the current situation in a historical context,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in a note Monday. “Yes, margins have begun to come down from their 2021 peak, but that doesn’t mean that they are not vulnerable to aggressive monetary tightening.”

On a trailing four-quarter basis, S&P 500 operating margins are above their rolling 10-year average, a chart in her note shows. Read: Morgan Stanley’s Mike Wilson warns U.S. stocks could slump another 22% if recession arrives in 2023

 

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