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Wells Fargo Securities Institutional Equity Strategist Gina Martin Adams gives her opinion on how weak earnings will affect the market.
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Well markers near markets nearing record level highs but our next guest says.
-- overly optimistic and it's cause for concern.
She actually is one of the lowest S&P 500 targets on -- -- now joining us Gina Martin Adams equity strategist at Wells Fargo.
Tell us that your guitar piano that's okay I'll let you say it again.
My targeted 1990 on the S&P 500 -- just under 10% correction from today's levels.
Yet it it's kind of interesting I think it's a sign of how much optimism that is in the market right now that mine forecasts -- -- so much attention yeah it at a 10% correction and a lot several years.
In my biggest reason is -- -- lost a lot of earnings -- momentum on the index over the last six months and companies are guiding us to actually expect lower earnings.
In the quarters ahead second quarter earnings estimates are coming down -- -- even third quarter earnings estimates are coming in.
So -- lost a lot of our earnings -- that typically is the primary driver of stock prices since that's a concern.
And then a short term it's just technicals and sentiment and leave.
Gotten to points of a fairly optimistic extremes for advisors investors and traders -- all right that you know.
It's all -- in and good times ahead and that usually suggests that a shock.
Could take prices a little you think stops at this level -- -- a little bit you know we're trading in more than the standard deviation above longer term downtrend -- trends than the multiple on -- the PE ratio on -- from 2000 today and consider that we've been in this longer term downtrend.
We are trading at a pretty large extreme over that trends.
It's not that stocks -- would massively overvalued on the long term scale it's really just in the short term are reaching -- sentiment extremes.
And earnings are not particularly supportive while prices continued attendants reach to new Hynes.
Why do you think sentiment is -- extremes -- we've been seeing you know.
Decent economic data that we have actually seen some decent earning reports as well companies are -- with cash -- mean.
Thank you could really do that glass half full story -- yes so -- Measure for sentiment and -- -- actually you know organizations that measure advisor sentiment the percentage of advisors that suggests they're bullish and bearish.
Investor sentiment the percent -- of investors the very same.
-- all of those surveys are suggesting that the consensus.
Of investors right now are bullish and their bullish to an extreme level that is typically is associated with top -- stocks as opposed to bottom.
So as a strategy I would imagine you would be little more defensive -- -- -- Pradesh.
It's a little bit what do you like brightly like health care stocks best for Tony their teen and then there I think you've got the best to -- that.
Fairly steady earnings found high dividend -- available and still low valuations critically.
We also generally like value stocks -- growth stocks.
Value stocks should show faster earnings spent on a relative basis and the parents in the -- stocks so you can find some opportunities in financials.
Maybe a little bit of utilities even and we like consumer Staples right now some pretty strong -- trends in these consumer Staples as we saw last week.
With some nice earnings growth opportunities that any.
Marmara -- been talking a lot about Europe coming back on the radar do you worry about Europe as well I deal -- hey you know it's very slowly coming back on the radar nobody's really talking about it some and yet -- we are quite concerned about -- -- the economic data.
It's still -- Dicey.
You seen a little bit a recovery in some of the sentiment surveys.
The -- on and 2012 and it troops to be fleeting sell a wanna be pretty cautious with respect to -- at the financial markets.
Reach their top in late January they're trying to test that again with today's rally.
But you know it still remains to be seen on -- happening -- -- caution is probably the way to go until proven on and I.
-- overseas quickly China I mean can be such a driver of the global economy you know convinced that so all things the world less well I would I would even if China -- really in the you know getting -- -- really starting to -- at a faster pace -- the -- in the commodity markets and that's -- I'm missing -- -- the copper prices and oil prices -- -- of -- -- clearly in this sideways trading range refusing to -- -- like equity prices have.
I suspect that if China really is getting ready to grow at a faster pace commodity prices affect show that and then we can get on board the China -- Perry couldn't you gotta keep coming back we need to debt or both sides of this jury Cinemark hands of Wells Fargo thank you thank you know.
