Have Markets Reached An “Investable Bottom” Or Is There A Way To Go Yet?
With earnings season just around the corner, American financial market TV pundit and analyst, Jim Cramer, has predicted that markets will soon reach an “investable bottom.” The upcoming slew of profit reports from some of the US’s biggest companies could create a sell-off that encourages serious buying. We could be about to witness a major bounce that has eluded markets since January 2022.
Earnings Seasons Trading
Over the following weeks, analysts are likely to issue cuts in their earnings forecasts for companies in the S&P 500, Cramer says. As markets react, prices will drop, providing opportunities for savvy traders to get in and make money.
Firms are likely to make negative announcements due to plummeting consumer confidence resulting from cost-of-living pressures.
For investors tracking the market, the news will lead to further losses. However, for traders who can see what’s coming, 2022 and 2023 could be bumper years.
Companies Falling Short Of Wall Street Expectations
Despite plunging markets, Wall Street remains largely bullish on the economy. Conventional analysis suggests that the US is continuing to do well, despite global headwinds and record inflation.
Cramer, however, believes that the consumer may inevitably crash the economy, even if other sectors are doing well. He also suggests that continued growth next year is unlikely.
Analysts are forecasting that the S&P will rise by around 8 percent in 2023 and 11 percent in 2024. If that happens, it would be like a normal year, he said, and with runaway inflation and a food crisis on the horizon, that is unlikely to happen.
Wall Street’s expectation of stellar company earnings looks to be unfounded, Cramer continues. Early guidance has been disappointing so far, and will likely get worse as the consumer weakens.
What Does This Mean For Traders?
For traders, the message is this: markets are still too bullish. Equity prices need to come down a little more for companies to become investable again.
Because of this, there is a strong case for shorting the market. With further plunges expected, some traders shouldn’t place too much weight on any bounce back. It will likely prove short-lived as rate hikes continue.