US stocks ‘astronomically complacent’ about trade war, says CLSA

US stock investors appear “astronomically complacent” about the amount of damage the trade war will inflict on corporate earnings, according to CLSA’s chief equity strategist.

For Alexander Redman, economic data show significant cause for concern about stock prices. US firms’ capital-expenditure intentions have gone negative for only the fourth time this century; the University of Michigan consumer sentiment index is at a multi-decade low; and two-thirds of US households now believe the unemployment will be worse in 12 months’ time.

“Real damage was done to corporate and household sentiment during the period that the tariffs were being applied,” Redman said in an interview, adding that it’s unlikely they will “return to where we were back in December.”

Even with the trade war hanging over markets, the S&P 500 sits less than 5% off its record high from February, and close to the median year-end forecast of strategists tracked by Bloomberg. What’s more, the market currently sees 10% earnings-per-share growth this year and 14% next year, versus the compound annual growth rate of about 6.7% in the past four to five decades, according to Redman, who says expectations are too high.