The USA enjoyed a boom based on tax cuts and monetary policy stimuli for a long time. But in the past few months American bullishness about the economy and US stock markets have also taken a heavy beating in the wake of the trade disputes and the government shutdown.
The reporting season for full year 2018 will now show just how much the US economy has really deteriorated and to what extent the companies will have to revise down their guidance. We assume that US companies will report double-digit growth figures (+11.4%) for the fifth consecutive quarter and will have performed far better than their European competitors. But the market will attach relatively little importance to the figures of the past. In the run-up to the reporting, for example, two thirds of the companies already lowered their guidance and analysts also lowered their estimates more than at any time since the third quarter of 2017. The most prominent companies that have already disappointed the market with the figures they have unveiled include Apple. So even the technology sector, which performed brilliantly for such a long time, has taken a few knocks recently. However, the energy companies have also lowered their estimates significantly because of the steep fall in the oil price.
In the wake of the weaker expectations for the fourth quarter of 2018 the estimates for 2019 have also been lowered more than the average for the last five years. After the unusually strong year in 2018, when profits grew by more than 20%, it may be assumed that the boom in the USA is coming to an end and that profit growth is settling down at a solid level of 7.3%. US companies will continue to grow, and we do not expect to see a US recession in 2019. So the decline in the S&P 500 index, which lost almost a fifth at the lowest point, would appear to be exaggerated. The valuation has fallen significantly recently and is below the average of the past few years. By the end of the year, therefore, we see the S&P rising to a level of 3,000 points.