© Reuters. Any Recovery in Equities Will Be Short-lived, Raymond James Warns
By Senad Karaahmetovic
Raymond James strategists reflected on the U.S. stocks after the S&P 500 closed the last week almost 5% higher.
Stocks staged a rally after the WSJ article hinted that may consider slowing rate hikes after it delivers another 75-bps rate hike next month. However, the strategists see stocks trading under pressure as long as yields are rising.
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The yield on a government bond surged to 4.33% on Thursday, setting a fresh 15-year high.
“A terminal 10-year Treasury yield of 4-4.5% would be logical, which is effectively where the bond market already is after last week. So unless the Fed increases the peak Fed funds rate above 5%, we may be very near a peak in 10-year Treasury yields,” the strategists told clients in a note.
However, they warned the firm’s clients that EPS expectations are yet to bottom. They see EPS forecasts coming down “materially” through 2023, and potentially 2024 if the Fed continued to act in a hawkish manner.
“Just a reminder, these last 2 hikes will likely be 1.50-1.75%, and we may not feel the full EPS impact from them until 2H23 or 2024,” the strategists concluded.