This article is edited by China International Capital Corporation, "third-quarter results of US stocks: expected repair from the bottom"

Us stock Q3: the performance is gradually repaired from the bottom

Starting from mid-October, US stocks will gradually enter a period of about a month of third-quarter results disclosure, Goldman Sachs Group and other financial stocks, Taiwan Semiconductor Manufacturing Co Ltd and other chip stocks will be the first to announce financial results this week. Look ahead for a week | Apple Inc will hold a new product launch; MINISO Group will land on the New York Stock Exchange on Thursday.

It is worth mentioning that Taiwan Semiconductor Manufacturing Co Ltd Q3 performance meeting (before the US stock market on Thursday) hit a new high, Taiwan Semiconductor Manufacturing Co Ltd Q2 earnings report (July 16) so far (October 12) up nearly 40%.

China International Capital Corporation believes that the U. S. stock Q3 performance will be gradually repaired from the bottom.

Since the first wave of epidemic and blockade in the United States was most severe from April to May, the biggest impact on earnings was also reflected in the second quarter, when S & P 500EPS was year-on-year-31%vs. First quarter-14%).

Although the epidemic in the United States escalated significantly again from the end of June to August, because the mortality rate was not high during this period, it only caused local and phased stagnation rather than a global reversal, not to mention the boost to demand from fiscal policy stimulus during the period.

This can be verified by the generally higher-than-expected economic data in the third quarter.In particular, consumption and real estate have fully repaired the losses caused during the epidemic, and consumer goods inventories have been at their lowest levels since the financial crisis.So in this context,Us stocks are also expected to gradually repair their third-quarter results from their second-quarter lows.

According to the consensus forecast compiled by the Factset, the market consensus now expects the S & P 500's third-quarter earnings to fall 20.5% year-on-year, a significant improvement from the second quarter; Nasdaq composite index earnings are expected to fall 6.5% year-on-year in the third quarter (down 17.6% in the second quarter); in addition, the market expects further repair in the fourth quarter.

Which plates are worth ambushing?

From the perspective of the sector, consumer services, transportation, and energy sectors, which are heavily affected by the epidemic, are still expected to decline by more than 100% year-on-year; capital goods, cars and parts, and banking sectors decline by about 30% year-on-year, which is basically the same as in the second quarter.

For finance, especially banks,The low interest rate environment and loan loss provisions have hurt profitability, but the transactional business has improved, but not enough to reverse overall growth.

For non-financial enterprisesThe sharp decline in income under the blockade of the epidemic is the main drag. At the same time, although the cost of the main business follows low oil prices, financial expenses follow low interest rates, management expenses follow wage growth, and tax burden all fall significantly, they still cannot completely offset the impact of declining income. as a result, corporate profit margins have also fallen sharply, especially in sectors such as transportation, energy, and capital goods, which are heavily affected by the epidemic, especially those with high operating leverage.

But,There are also five sectors that are expected to maintain positive growth in Q3: pharmaceuticals and biotechnology, semiconductors, insurance, snacks and software.

ETF--$ Health Care Unit ETF-SPDR (XLV.US) $

Semiconductor plateETF--$iShares ASUS Philadelphia Exchange Semiconductor ETF (SOXX.US) $

Software plate ETF--$iShares Asustek North American Technology Software ETF (IGV.US) $Has recently reached an all-time high.

In terms of the most significant improvement in EPS growth, sectors such as automobiles and parts, consumer services and consumer durables performed best.

Risk appetite improved, US stocks bullish increased

Since May, with the improvement in mood and the resumption of work, market earnings are expected to gradually stabilize, and profit adjustment sentiment has continued to improve.Since the third quarter, the profit consensus forecast has begun to be revised up. At present, the market expects the S & P 500's EPS to fall by 18.3% in 2020, EPS to grow by 25.4% in 2021, NASDAQ's EPS to decline by-12.0% in 2020, and EPS to rise by 35.1% in 2021.

Looking ahead, overall earnings are expected to continue the repair trend.It is worth noting, however, that the recent decline in earnings adjustment sentiment from its highs may indicate that the fastest period of short-term earnings upward revision is over.Combined with the recent slower pace of economic data repair and higher expectations, it may indicate that earnings in the third quarter are lower than expected in the second quarter (82% of companies exceed expectations and overall exceed expectations by 22%).

The rise in risk appetite pushed VIX back down and the put/call ratio continued to decline. Positions, U. S. stock bulls continue to increase.