Australia Strategy: Global leaders update - US reporting themes

About the author:

Tom Sartor
Author name:
By Tom Sartor
Job title:
Senior Analyst
Date posted:
08 September 2022, 7:00 AM
Sectors Covered:
Junior (Emerging) Resources, Bulk Materials

  • Our Asset Allocation Update – Q3 2022 details our recommended 22% exposure to international equities for investors with a balanced risk profile.
  • While the macro-economic backdrop remains uncertain, recent US quarterly earnings uncovered some encouraging signs of easing inflation and resilient consumption.
  • Several global franchises are trading at 20-35% discounts to consensus estimates of intrinsic value, offering opportunities for long-term portfolio investors.

Global shares versus an uncertain backdrop

The S&P500 remains down 17% year-to-date. Markets recently took a reality check via US Fed comments that it would likely keep interest rates high “for some time” in order to eradicate the risks posed by persistent inflation.

Investors are also concerned about a slowing Chinese economy due to prolonged Covid controls, with the CCP congress in October to be keenly watched.

But anecdotes from US quarterly earnings paint a resilient backdrop

Signs that inflation/ supply chain/ labour pressures are easing?

Most of our commodities, most of the things that go into a Tesla - prices are trending down - which suggests we are past peak inflation – Tesla CEO.

We foresee a significant reduction in inflation in the coming 6-12 months and that we might be able to avoid the damaging wage-price inflation spiral that was so problematic in the 1970s – Lowe’s CEO

We are now seeing signs that supply chain disruptions could find some balance from this point as we move through the rest of the year – Under Armour CFO

While conditions are far from normal, there are signs that both costs and volatility may have peaked. Lead times in shipping have begun to decline – Target CEO 

Underlying labour availability, I'd say that hasn't got worse. That's probably got a little bit better – Moog CEO

Resilient consumer sentiment/ dynamics

Whether we are in a recession or not really isn’t the important thing. It’s what it feels like for the people going through this – Bank of America CEO

We’re operating in a unique environment with many crosscurrents, but given all that, our customers have been incredibly resilient – Home Depot CEO

As the year has progressed, we've seen more pronounced consumer shifts and trade-down activity – Walmart CFO 

It’s hard to tell with the continued supply constraints, but consumer auto spending seems strong, we see really positive signs there – Ford Motors CFO 

Global oil demand is now similar to pre-pandemic levels. And while there are growing concerns about potential demand impacts from a recessionary environment, supply factors may overwhelm those impacts – Panos CEO

International shares bearing the brunt of macro uncertainty

Growth stocks have had a choppy ride since the onset of the pandemicSource: Morgans Financial, Company

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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