mister wrote:
I see where Morgan Stanley and BOA are predicting a "Melt Up" in the market soon.
Obviously, they are not reading Igy's comments on this thread. Or! Maybe they are.
Incorrect on Morgan Stanley, May 1 publication “Don’t Bet on a Melt-Up Now,” by Chief Investment Officer Mike Wilson who correctly called the 4th quarter 2018 drop.
“First, consensus S&P 500 earnings estimates for the first quarter have been coming down hard since last September. Back then, forecasts were for 10% year-over-year growth. Between September and March, forecasts for earnings growth fell 14% to a 4% decline. With the earnings season about half way over, it looks like actual results will come in between 0% and -2%. Better than expected? Yes. Strong? Hardly.
More importantly, our top-down earnings growth model, which foreshadowed the earnings slowdown in the first place, is still indicating consensus S&P 500 forward 12- month earnings estimates are too high by approximately 8%. Meanwhile, the S&P 500 is at an all-time high. Either our model is dead wrong or stocks are once again ahead of reality, as they were last September and in January 2018. We think it’s more of the latter and, just as they overshot to the downside in December, equity markets may be overshooting to the upside now. The other thing we hear getting bantered around to justify even higher market prices is that we might enter a “melt-up” phase.
That’s funny, because more than 100% of the entire move in the global stock market this year is due to higher valuations. Earnings-per-share forecasts for 2019 have actually declined by 5% even with the better-than-expected first quarter reports.”