Peter Kenny, senior market strategist at Global Markets Advisory Group explains why he believes stocks will fall by about 5 percent, and what create upside later in the year. Bobbi Rebell reports.
Global economic concerns weighing on US markets here is mark Peter Kenny he is senior market strategist global market advisory group great to have you thanks. Are all the concerns about the global economic outlook and the Fed and interest rates valet. I think largely yes I mean clearly. The global demand. Profile that we're seeing in the markets today that's being present the market say speaking to weakness not strength. There are several key areas of the world we're seeing zero interest rates negative interest rates. And that speaks to a lack of a demand that lack of demand is being present US equity markets now. And we had the FOMC behind us hang clearly some very dovish commentary guidance moving forward. US equity markets are gonna have to now pivot towards earnings in the hope is that earnings are better than expected significantly so. Well the expectations are pretty bad I think Thomson Reuters estimates down more than 7%. That's an encouraging so how vulnerable on it are these markets. Well it's not encouraging at all on a year over year basis. Q and is expected to show a seven point 2% contraction. In EPS for the S&P 500 that's on top of the four plus percent a drop that we so over the same measurement for Q4. And a weak second half of last year so. The slowdown is accelerating not pausing. That's so that's very much cause for concern if you coupled that with what is expected to be. Very cautious guidance. As a result of the Edmonds in the US star in the event that we see Doocy you know ever rise in rates this year. Coupled with uncertainty over petroleum. Crude pressing. And bank global scenario that we just spoke about this earnings season may be a bit of a bomber. And you mentioned outlook that's really going to be he and how. That's that's me sound like you're doing balloons as well I'm very concerned because I'm not sure where the next. Driver positive price appreciation for US equity markets will come from it's not gonna come from the Fed even is as television as it is. It doesn't look like it's going to be Q1 earnings. And guidance it appears to be more informed by concerned. President and enthusiasm. And the concern is predicated on some fairly major teams that do. Drive you know they do drive revenue earnings and profit. So what's the take away for investors expect in this market what in this market I think you have to remain very very cautious because. I think that the path of least resistance is at least now that we've had this very massive rebound in Q1. I think the path of least resistance now is lower. Conan offered dramatic overnight but he recess. Which will likely bring some compression to price earnings ratios for the S&P 500 companies have for the broader market. And I think it would we gonna need dad if we're gonna see anything meaningful price depreciation and the second half the year where I think the florist and well I think we could see another maybe 45% off the top here. But I'm not calling for dramatic pull bank I think that we've got that pullback which I did call for earlier in the year. I think now we're going to be looking at more west a resent. Four across the board nesting yesterday now Russell and I do think that you probably gonna have to be very patient. Because again half of leaves resistance is lower in the near term and headwinds are are very much a part of the narrative. And not just for the investors but for the for the says. You know thank you Peter thank you our thanks to Peter Kenny about your belt this is players.