Source: Jin10 Data
Author: Zhu Yu
A strategist at Deutsche Bank stated that by the end of next week, nearly half of the constituents of the S&P 500 index will enter a blackout period.
Deutsche Bank strategist warned this week that the stock buyback blackout period on the eve of earnings season could lead to a short-term pullback in the market after the S&P 500 and Nasdaq composite index hit historic highs. Strategists Parag Thatte and Binky Chadha wrote in a report on Monday, "Large-scale buybacks of up to US$1 trillion annually have had strong support for solid returns. However, in the short term, free-discretion buybacks decided by management will be reduced as companies enter the blackout period before reporting earnings for the second quarter." In the report, Deutsche Bank strategists said, "We expect that by the end of next week, nearly half of the S&P 500 components will enter the blackout period."
Deutsche Bank strategists Parag Thatte and Binky Chadha wrote in a report on Monday, "Large-scale buybacks of up to US$1 trillion annually have had strong support for solid returns. However, in the short term, free-discretion buybacks decided by management will be reduced as companies enter the blackout period before reporting earnings for the second quarter."
Deutsche Bank strategists mentioned in the report that "We estimate that nearly half of the S&P 500 components will enter the blackout period by the end of next week."
Most US-listed companies have a blackout period policy that restricts stock trading within the last two weeks before the end of the quarter and one or two days after the earnings release.
Deutsche Bank strategists and others have pointed out that the blackout period before the first quarter earnings season in April was a factor in the slight pullback of the S&P 500 index that month. Strategists warned early in April that seasonal equity inflows slowing and a temporary reduction in share buybacks could result in a downward impact on the market.
At the same time, the long positions in the stock market are "gradually improving", approaching but not reaching the top of the long-term range, currently at the 95th percentile.
Strategists said that this position configuration is only slightly higher than indicated by profit growth, and occurs when macroeconomic data brings more negative surprises, unlike the situation in April when data continued to produce surprises.
"The conditions for a second respite in the US stock market are now in place, including all three of the concerns covered by our supply and demand framework: spurred on by technology stocks, positions have sharply but narrowly risen to near the top of the historic range; increased risk appetite has led to a boom in stock inflows, but now appears to be overextended; with the arrival of the blackout period before earnings season next week, buybacks are temporarily reduced again," they added.
After hitting new highs in June, the S&P 500 and Nasdaq composite indexes saw slight pullbacks last weekend and on Monday due to fluctuations in Nvidia's stock price, but the market rebounded on Tuesday. In contrast, the Dow Jones Industrial Average has underperformed other major indices in 2024, with a rise of less than 4%, while the S&P 500 and Nasdaq indexes have risen by over 14% and 18%, respectively.
In comparison, the Dow Jones Industrial Average has lagged behind other major indices in 2024, with gains of less than 4%, while the S&P 500 and NASDAQ indexes have risen more than 14% and 18%, respectively.
Editor/Jeffy