Earnings estimates must come down for the S&P 500 to find a tradable bottom, says Cameron Dawson. She’s the Chief Investment Officer at NewEdge Wealth.
Dawson’s remarks on CNBC’s ‘Squawk Box’
According to Dawson, amidst a tightening cycle, estimates should sink significantly below the average – something we’re yet to see happen. On CNBC’s “Squawk Box”, she said:
Estimates have come down from 22 times at year start to 16.5 times, but that’s just about average. So, we think that [there’s still] downward pressure on equities from the earnings and multiple fronts and we haven’t seen the low yet.
The U.S. Federal Reserve raised rates by 75 basis points this month that pushed the benchmark index into the bear market territory (over 20% decline from recent high).
Keeping invested continues to be a smart move
In May, inflation hit a new forty-year high of 8.60%, but Dawson reiterated that keeping invested in equities continues to be a smart decision. Explaining why, she added:
The biggest mistake is selling after a major correction and then being too scared to get back in, missing the start of a new cycle. Timing that is really difficult, so staying invested remains important.
She recommends investing in high quality names at trimmed valuations that have strong enough balance sheet to weather a recession. The U.S. economy shrank at an annualised pace of 1.60% in the first quarter of 2022.
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