On November 9th, strategists from Morgan Stanley, Royal Bank of Canada Capital Markets ( RBC ), and JPMorgan Chase stated that the recent heavy selling in U.S. stocks may be coming to an end, and the market is expected to stabilize and rebound before the end of the year. However, whether corporate earnings expectations can remain stable remains the key to supporting a recovery in stock market valuations.
Morgan Stanley's chief U.S. equity strategist, Michael Wilson, believes that this round of adjustment is entering its final stage. As the S&P 500 index makes up for previous losses and gradually reflects the weak performance of individual stocks, the index may further decline to the range of 7,100 to 7,300 points. He expects the market to test last week's lows again, followed by a rebound at the end of the year, and advises investors to increase their holdings in high-quality cyclical stocks whose profit forecasts continue to be raised.
RBC Strategist Lori Calvasina also believes that market sentiment and valuation indicators suggest that U.S. stocks may stabilize soon. A survey by the National Association of Individual Investors ( AAII ) shows that the gap between the proportion of bullish and bearish investors over the past four weeks has dropped to a level that historically corresponds to an average increase of 11% in the following 12 months. Calvasina indicates that institutional investors are currently more shocked by the market downturn than engaged in panic selling. However, she emphasizes that corporate earnings expectations still need to be stable in order to support a rebound in valuations.
Regarding the market concerns about the risk of a slowdown in AI infrastructure investment, Wilson estimates that data center-related expenditures will account for only about 5% of the total revenue of the components of the S&P 500 index in 2027. Therefore, even if some data center projects are postponed after the mid-term elections in the United States, the direct impact on the overall corporate profits of the S&P 500 index will be relatively limited.
