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Are U.S. Stocks "Priced to Perfection"? Global Week Ahead
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In the Global Week Ahead, the world’s financial markets head into the month of December, laden with uncertainty over:
Geopolitics
Global trade, and
Economic growth
Particularly in Europe. France is in the crosshairs there, over its budget.
U.S. President-elect Donald Trump's pledge to impose steep import tariffs on Canada, Mexico, and China has jolted markets, and upended interest rate and inflation forecasts.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) November Ends. (A Volatile?) December Begins.
Traders got a taste of what the months ahead may look like:
Trump's pledge to slap tariffs on some of the United States' major trading partners has juiced up the U.S. dollar even more
The greenback rose more than +1.5% against the Canadian and Mexican currencies, highlighting sensitivity to Trump-related headlines, and uncertainty over his policies
So, November ends with the biggest monthly fall in the euro since early 2022, the steepest drop in German bond yields this year, the biggest bitcoin surge since February and one of the biggest monthly jumps in U.S. stocks this year.
Now, for a volatile December.
Trump aside, U.S. and euro area rates are tipped to fall, Japan's could rise.
Geopolitics may bring relief (Middle East) and fear (Russia/Ukraine) as well as add political turbulence (France, Germany).
(2) U.S. Large-Cap Share Indices? They Look “Priced to Perfection.”
As U.S. stocks hover near record highs, investors await next Friday's jobs report for a clearer picture of how the economy is faring ahead of the Federal Reserve’s December meeting.
Robust U.S growth has helped power stocks higher all year, even as it raises concerns of an inflationary rebound that can undo the Fed’s progress in taming consumer prices.
But another blowout jobs report, such as the one that shocked markets in October, could derail expectations for how much the Fed will be able to cut in the months ahead, potentially shaking an important pillar of the stocks rally.
Indeed, minutes of the last policy meeting showed Fed officials aren't unanimous on how much more rates should fall.
Economists polled by Reuters expect the U.S. to have created +183K new jobs last month.
(3) U.S. Tariff Fears Rise, as Mainland China Stimulus Hopes Also Rise.
Trump's threat of new tariffs on Mexico, China and Canada hit Asian markets hard, but mainland shares have mostly shrugged off talk of a +10% levy on all Chinese imports, partly because it was lower than the +60% he campaigned on.
But analysts think Beijing could produce whatever new stimulus is needed to counter the economic drag of a trade war, and several say the ultimate result will be an acceleration of China's high-tech self-sufficiency drive.
The biggest loser has been staunch U.S. ally Japan, with the Nikkei down about -1.4% since Trump's Truth Social post, mostly led by auto stocks.
Yet Honda is the top-ranking automaker after Tesla on Cars.com's "Made in America" list, with Toyota's Camry sedan and Highlander SUV also rating highly.
Mexican factories remain a vulnerability for everyone, particularly for high-margin, top-selling pickup trucks.
(4) A Proposed Budget in France Has Escalated Political Tensions.
Tensions escalated in France over Prime Minister Michel Barnier's proposed budget, which contains 60 billion euros in painful tax rises and spending cuts.
Far-right National Rally leader and coalition partner Marine Le Pen has threatened to topple the government over it and speculation is rising that this could happen by Christmas.
French bonds haven't sold off too hard, but they've lagged the market so badly the premium France must pay to borrow over 10 years relative to Germany is back to 2012 crisis-era highs.
The government is scrambling to compromise. The Senate begins examining the budget bill on Monday.
(5) South Africa Takes Over the G20 Presidency.
South Africa takes over the G20 presidency on Sunday, the first African country to lead the group that represents 85% of the world's economy, 75% of its trade and 67% of its population.
President Cyril Ramaphosa wants to focus on climate change, inclusive growth, food security and artificial intelligence.
But his agenda might be bumping up against the reality of trade wars and diplomatic tensions as Trump moves into the White House.
South Africa is the fourth emerging market in a row to assume the chair after Indonesia, India and Brazil, and will hand the baton to the U.S. in December 2025.
Zacks #1 Rank (STRONG BUY) Stocks
These are the top three stocks, in our current #1 list, by Market Capitalization…
(1) Tesla (TSLA - Free Report) ): This “Mag 7” stock is, at the moment I write, priced at $332 a share. It is found in Zacks Domestic-Auto industry. The market capitalization is a whopping 1.07T. I see a Zacks Value score of F (no surprise), a Zacks Growth score of D (no typo there!) and a Zacks Momentum score of C.
Image Source: Zacks Investment Research
Tesla is the market leader in battery-powered electric car sales in the United States, with roughly 70% market share.
The company's flagship Model 3 is the best-selling EV model in the United States.
Tesla, which has managed to garner the reputation of a gold standard over the years, is now a far bigger entity that what it started off since its IPO in 2010, with its market cap crossing $1 trillion for the first time in October 2021.
The EV king's market capitalization is more than the combined value of legacy automakers including Toyota, Volkswagen, Daimler, General Motors and Ford.
Over the years, Tesla has shifted from developing niche products for affluent buyers to making more affordable EVs for the masses.
The firm's three-pronged business model approach of direct sales, servicing, and charging its EVs sets it apart from other carmakers.
Tesla, which is touted as the clean energy revolutionary automaker, is much more than just a car manufacturer.
(2) Taiwan Semiconductor (TSM - Free Report) ): This cornerstone chip stock trades at $181 a share. It is found in our Semiconductor – Circuit Foundry industry. It now has a market cap of $939B. I see a Zacks Value score of C, a Zacks Growth score of C and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Taiwan Semiconductor Manufacturer Co. is the world's largest dedicated integrated circuit foundry.
As a foundry, the Company manufactures ICs for its customers based on their proprietary IC designs using its advanced production processes.
TSMC's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the leading IC foundry in the world.
(3) Tencent (TCEHY - Free Report) ): This is a $52 a share Mainland China stock. It is found in our Internet-Services industry. The stock now has a market cap of $476B. I see a Zacks Value score of B, a Zacks Growth score of A and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Tencent Holdings Ltd. is an Internet service portal.
Tencent provides value-added Internet, mobile and telecom services and online advertising.
Tencent's leading Internet platforms in China are QQ Instant Messenger, QQ.com, QQ Games, Qzone, 3g.QQ.com, SoSo, PaiPai and Tenpay.
It has brought together China's largest Internet community, to meet the various needs of Internet users including communication, information, entertainment, e-commerce and others.
Tencent Holdings Ltd. is headquartered in Shenzhen, the People's Republic of China.
Key Global Macro
Friday’s U.S. nonfarm payroll report for NOV is the big macro indicator this week.
On Monday, Japan’s Jibun Bank manufacturing PMI for NOV comes out at 49.0, from an upwardly revised 49.2 the prior month. This remains below the 50 threshold that separates growth from contraction.
The Euro Area’s HCOB manufacturing PMI for NOV also came out, at 45.2. This is in-line with expectations, but down from an upwardly revised 46.0 for October. This puts European manufacturing further below the growth threshold.
The Euro Area’s household unemployment rate is 6.3%, in-line with the previous month’s read and remaining at the lowest level in history.
The U.S. ISM manufacturing PMI for NOV comes out. The prior reading was 48.8, and the consensus looks for another 48.8 this month, too.
On Tuesday, U.S. JOLTS job opening for OCT come out. A prior SEP reading was at 7.443M. The consensus looks for a higher 7.49M.
On Wednesday, U.S. ADP private job additions should be +166K in NOV, after printing a strong +233K in OCT.
The Fed’s Beige Book comes out.
On Thursday, U.S. initial weekly jobless claims come out. Last week, they were 213K, and the 4-week moving average was 217K. Those labor market statistics are quite tight.
On Friday, the Euro Area’s seasonally adjusted Q3 y/y real GDP growth rate should be +0.9%.
U.S. nonfarm payrolls for NOV should be +183K, up from a hurricane-lowered +12K in the month of OCT.
Conclusion
Zacks Research Director Sheraz Mian’s “Q3 Earnings Season Scorecard” shared:
Through Friday, Nov. 22nd, we have seen Q3-24 results from 476 S&P500 members, or 92.2% of the index’s total membership.
We had another 8 S&P500 members report results, during the holiday-shortened Thanksgiving week, including Dell, HP, Best Buy and others.
Total earnings for these 476 companies that had reported were up +8.1% from the same period last year, on +5.5% higher revenues.
73.7% beat EPS estimates
61.8% beat revenue estimates
The proportion of the 476 index members that beat both EPS and revenue estimates is 51.1%
Starting with Q2-23, the overall y/y EPS growth trend for the S&P500 index members appears stable-to-positive.
An improving EPS series now runs across 6 reporting quarters in a row.
Though fewer companies beat Q3 consensus estimates, relative to other recent periods
In fact, both EPS and revenue beat percentages in Q3 track below their 20-quarter averages
In light of that…
It may behoove U.S. stock traders to consider.
Is Q3-24 where a fundamental EPS and Revenue growth top forms — in this 1 ½ year growth path?
That’s it for me!
Enjoy an excellent trading week.
John Blank, PhD. Zacks Chief Equity Strategist and Economist
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Are U.S. Stocks "Priced to Perfection"? Global Week Ahead
In the Global Week Ahead, the world’s financial markets head into the month of December, laden with uncertainty over:
Particularly in Europe. France is in the crosshairs there, over its budget.
U.S. President-elect Donald Trump's pledge to impose steep import tariffs on Canada, Mexico, and China has jolted markets, and upended interest rate and inflation forecasts.
Next are Reuters’ five world market themes, reordered for equity traders—
(1) November Ends. (A Volatile?) December Begins.
Traders got a taste of what the months ahead may look like:
So, November ends with the biggest monthly fall in the euro since early 2022, the steepest drop in German bond yields this year, the biggest bitcoin surge since February and one of the biggest monthly jumps in U.S. stocks this year.
Now, for a volatile December.
Trump aside, U.S. and euro area rates are tipped to fall, Japan's could rise.
Geopolitics may bring relief (Middle East) and fear (Russia/Ukraine) as well as add political turbulence (France, Germany).
(2) U.S. Large-Cap Share Indices? They Look “Priced to Perfection.”
As U.S. stocks hover near record highs, investors await next Friday's jobs report for a clearer picture of how the economy is faring ahead of the Federal Reserve’s December meeting.
Robust U.S growth has helped power stocks higher all year, even as it raises concerns of an inflationary rebound that can undo the Fed’s progress in taming consumer prices.
But another blowout jobs report, such as the one that shocked markets in October, could derail expectations for how much the Fed will be able to cut in the months ahead, potentially shaking an important pillar of the stocks rally.
Indeed, minutes of the last policy meeting showed Fed officials aren't unanimous on how much more rates should fall.
Economists polled by Reuters expect the U.S. to have created +183K new jobs last month.
(3) U.S. Tariff Fears Rise, as Mainland China Stimulus Hopes Also Rise.
Trump's threat of new tariffs on Mexico, China and Canada hit Asian markets hard, but mainland shares have mostly shrugged off talk of a +10% levy on all Chinese imports, partly because it was lower than the +60% he campaigned on.
But analysts think Beijing could produce whatever new stimulus is needed to counter the economic drag of a trade war, and several say the ultimate result will be an acceleration of China's high-tech self-sufficiency drive.
The biggest loser has been staunch U.S. ally Japan, with the Nikkei down about -1.4% since Trump's Truth Social post, mostly led by auto stocks.
Yet Honda is the top-ranking automaker after Tesla on Cars.com's "Made in America" list, with Toyota's Camry sedan and Highlander SUV also rating highly.
Mexican factories remain a vulnerability for everyone, particularly for high-margin, top-selling pickup trucks.
(4) A Proposed Budget in France Has Escalated Political Tensions.
Tensions escalated in France over Prime Minister Michel Barnier's proposed budget, which contains 60 billion euros in painful tax rises and spending cuts.
Far-right National Rally leader and coalition partner Marine Le Pen has threatened to topple the government over it and speculation is rising that this could happen by Christmas.
French bonds haven't sold off too hard, but they've lagged the market so badly the premium France must pay to borrow over 10 years relative to Germany is back to 2012 crisis-era highs.
The government is scrambling to compromise. The Senate begins examining the budget bill on Monday.
(5) South Africa Takes Over the G20 Presidency.
South Africa takes over the G20 presidency on Sunday, the first African country to lead the group that represents 85% of the world's economy, 75% of its trade and 67% of its population.
President Cyril Ramaphosa wants to focus on climate change, inclusive growth, food security and artificial intelligence.
But his agenda might be bumping up against the reality of trade wars and diplomatic tensions as Trump moves into the White House.
South Africa is the fourth emerging market in a row to assume the chair after Indonesia, India and Brazil, and will hand the baton to the U.S. in December 2025.
Zacks #1 Rank (STRONG BUY) Stocks
These are the top three stocks, in our current #1 list, by Market Capitalization…
(1) Tesla (TSLA - Free Report) ): This “Mag 7” stock is, at the moment I write, priced at $332 a share. It is found in Zacks Domestic-Auto industry. The market capitalization is a whopping 1.07T. I see a Zacks Value score of F (no surprise), a Zacks Growth score of D (no typo there!) and a Zacks Momentum score of C.
Image Source: Zacks Investment Research
Tesla is the market leader in battery-powered electric car sales in the United States, with roughly 70% market share.
The company's flagship Model 3 is the best-selling EV model in the United States.
Tesla, which has managed to garner the reputation of a gold standard over the years, is now a far bigger entity that what it started off since its IPO in 2010, with its market cap crossing $1 trillion for the first time in October 2021.
The EV king's market capitalization is more than the combined value of legacy automakers including Toyota, Volkswagen, Daimler, General Motors and Ford.
Over the years, Tesla has shifted from developing niche products for affluent buyers to making more affordable EVs for the masses.
The firm's three-pronged business model approach of direct sales, servicing, and charging its EVs sets it apart from other carmakers.
Tesla, which is touted as the clean energy revolutionary automaker, is much more than just a car manufacturer.
(2) Taiwan Semiconductor (TSM - Free Report) ): This cornerstone chip stock trades at $181 a share. It is found in our Semiconductor – Circuit Foundry industry. It now has a market cap of $939B. I see a Zacks Value score of C, a Zacks Growth score of C and a Zacks Momentum score of B.
Image Source: Zacks Investment Research
Taiwan Semiconductor Manufacturer Co. is the world's largest dedicated integrated circuit foundry.
As a foundry, the Company manufactures ICs for its customers based on their proprietary IC designs using its advanced production processes.
TSMC's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the leading IC foundry in the world.
(3) Tencent (TCEHY - Free Report) ): This is a $52 a share Mainland China stock. It is found in our Internet-Services industry. The stock now has a market cap of $476B. I see a Zacks Value score of B, a Zacks Growth score of A and a Zacks Momentum score of A.
Image Source: Zacks Investment Research
Tencent Holdings Ltd. is an Internet service portal.
Tencent provides value-added Internet, mobile and telecom services and online advertising.
Tencent's leading Internet platforms in China are QQ Instant Messenger, QQ.com, QQ Games, Qzone, 3g.QQ.com, SoSo, PaiPai and Tenpay.
It has brought together China's largest Internet community, to meet the various needs of Internet users including communication, information, entertainment, e-commerce and others.
Tencent Holdings Ltd. is headquartered in Shenzhen, the People's Republic of China.
Key Global Macro
Friday’s U.S. nonfarm payroll report for NOV is the big macro indicator this week.
On Monday, Japan’s Jibun Bank manufacturing PMI for NOV comes out at 49.0, from an upwardly revised 49.2 the prior month. This remains below the 50 threshold that separates growth from contraction.
The Euro Area’s HCOB manufacturing PMI for NOV also came out, at 45.2. This is in-line with expectations, but down from an upwardly revised 46.0 for October. This puts European manufacturing further below the growth threshold.
The Euro Area’s household unemployment rate is 6.3%, in-line with the previous month’s read and remaining at the lowest level in history.
The U.S. ISM manufacturing PMI for NOV comes out. The prior reading was 48.8, and the consensus looks for another 48.8 this month, too.
On Tuesday, U.S. JOLTS job opening for OCT come out. A prior SEP reading was at 7.443M. The consensus looks for a higher 7.49M.
On Wednesday, U.S. ADP private job additions should be +166K in NOV, after printing a strong +233K in OCT.
The Fed’s Beige Book comes out.
On Thursday, U.S. initial weekly jobless claims come out. Last week, they were 213K, and the 4-week moving average was 217K. Those labor market statistics are quite tight.
On Friday, the Euro Area’s seasonally adjusted Q3 y/y real GDP growth rate should be +0.9%.
U.S. nonfarm payrolls for NOV should be +183K, up from a hurricane-lowered +12K in the month of OCT.
Conclusion
Zacks Research Director Sheraz Mian’s “Q3 Earnings Season Scorecard” shared:
Through Friday, Nov. 22nd, we have seen Q3-24 results from 476 S&P500 members, or 92.2% of the index’s total membership.
We had another 8 S&P500 members report results, during the holiday-shortened Thanksgiving week, including Dell, HP, Best Buy and others.
Total earnings for these 476 companies that had reported were up +8.1% from the same period last year, on +5.5% higher revenues.
Starting with Q2-23, the overall y/y EPS growth trend for the S&P500 index members appears stable-to-positive.
An improving EPS series now runs across 6 reporting quarters in a row.
In light of that…
It may behoove U.S. stock traders to consider.
Is Q3-24 where a fundamental EPS and Revenue growth top forms — in this 1 ½ year growth path?
That’s it for me!
Enjoy an excellent trading week.
John Blank, PhD.
Zacks Chief Equity Strategist and Economist