S&P 500: Earnings optimism versus conflict shock – Deutsche Bank

Deutsche Bank’s strategists highlight that S&P 500 futures are lower as the Iran conflict escalates and energy prices jump, pressuring global risk sentiment. However, their US equity strategists still see a supportive macro backdrop, judging consensus expectations for mid-teens S&P 500 earnings growth as justified and even projecting stronger growth, led by megacap tech and financials into the current reporting season.

Conflict pressure meets earnings optimism

"Markets have seen a clear risk-off move this morning after no deal was reached in the US-Iran talks over the weekend, with the US set to blockade the Strait of Hormuz for vessels entering or departing Iranian ports."

"So despite last week’s optimism when the two-week ceasefire was announced, the mood has shifted negatively once again, with Brent crude oil prices up +7.39% this morning to $102.24/bbl. And in turn, that’s revived fears about a stagflationary shock, with equities and bonds losing ground around the world."

"Against that backdrop, futures on the S&P 500 are down -0.73% this morning, whilst those on the DAX are down -1.47%, which fits with the pattern of European assets underperforming given the continent’s greater exposure to an energy shock."

"When it comes to the week ahead, clearly the Iran conflict will be the main focus, but there are a few other things to look out on the calendar. First, the Q1 earnings season will start to kick off, with this week’s releases including several US financials."

"Our US equity strategists have a full preview, and they argue that the bottom up-analyst consensus for S&P 500 earnings growth accelerating into the mid-teens (16%) is justified by a favourable macro environment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)