Exploring this week's US earnings reports, awaiting signals of economic recovery👀
Back on the US earnings side, we will see a full list of consumer-facing companies reporting next week, including Walmar, Target, and Home Depot to get the latest report card on the exceptional US consumer resilience. Q2 earnings is currently tracking -4% YoY, much better than the Street's forecasted 9% decline, with particular positive surprises in the consumer discretionary sector. Furthermore, Q2 earnings are widely expected to be the trough of the current slowdown cycle, with EPS expected to return to positive territory before the end of the year.
Positions wise, Morgan Stanley reported that dealers' net option gamma position has turned negative for the first time in many months, hence explaining some of the more exacerbated moves in equities over the past week. Furthermore, with systematic funds still holding extended long exposures in equities, markets still feel susceptible to a position-led sell-off in the near term. We continue to advocate taking a more defensive position at this juncture.
