Chief Investment Strategist
Summary: This week, a large number of companies will report earnings, including Netflix, Tesla, and ASML. Investors will be watching these earnings reports closely to see how they impact the market. We believe Netflix can exceed estimates for Q4, boosting sentiment in technology stocks. Tesla is facing increased competition and may have to abandon its growth targets in the near-term future. ASML is expected to have sluggish revenue growth in FY24, but analysts expect revenue growth to increase to 22.3% in FY25. The Q4 earnings have so far been positive, with especially financials and consumer discretionary companies delivering the biggest positive surprises. Technology stocks have been pushing equities to new all-time highs, and operating income (EBITDA) has massively rebounded for Nasdaq 100 companies in the previous two fiscal quarters.
The Q4 earnings season has been dominated so far by US financials, but this week the earnings season broadens out to industrials, technology and health care. The list below highlights the 30 largest market cap companies reporting earnings this week.
Based on retail investor exposure the three most important earnings releases this week will be Netflix, Tesla, and ASML setting the sentiment for US equities during the week. Next week the earnings season gets into its most important week with earnings releases from the largest US technology companies.
Netflix: Full speed on margin expansion and growth
Tesla: Growth delusions and gross margin fight
ASML: Surfing the boom in AI investments
The Q4 earnings have so far delivered a net positive surprise on both revenue and earnings with especially financials and consumer discretionary companies delivering the biggest positive surprises. The message from US banks also leaned on the positive side for 2024 although acknowledging the key risks to the economy. JPMorgan Chase is expected to expand the business this year and the net charge-offs (bad debt written off) in percentage of loans are still running at very low levels approaching the average level from the years before the pandemic.
There have been a lot of talk about the rising technology stocks pushing equities to new all-time highs. Some argue that it is crazy and animal spirits are too wild and not backed by reality, but in fact the reality is actually that operating income (EBITDA) has massively rebounded for Nasdaq 100 companies in the previous two fiscal quarters supporting the ongoing rally in technology stocks.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
