LIVE MARKETS-Truist using recent bounce to cut their view on equities

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TRUIST USING RECENT BOUNCE TO CUT THEIR VIEW ON EQUITIES

In the wake of the recent snapback in equities, Truist is downgrading stocks from "neutral" to "less attractive" and raising cash one notch.

With this, Truist is reducing U.S. large caps from "most attractive" to "attractive," as well as downgrading U.S. mid caps from "attractive" to "neutral."

"In late February, we downgraded stocks from attractive to neutral, small caps to less attractive and upgraded cash one notch. Today, we are using the sharp ~10% rebound from the lows to take an additional step to a slightly more defensive posture," writes Truist's chief market strategist, Keith Lerner in a note out Thursday.

Truist believes the U.S. economy is set to slow in a meaningful way later this year given the current uncertainty and disruptions caused by the tariffs.

Meanwhile, Lerner says the market is "far from cheap."

"The S&P 500’s forward price-to-earnings (P/E) is around 19.5x. Notably, the forward P/E remains above the highest level reached in any of the 15 years prior to the pandemic, despite arguably higher-than-average uncertainty," he writes.

As Lerner sees it, the actual forward P/E is likely even higher given that forward earnings estimates have yet to be reduced in the face of a slowing economy and the potential profit margin pressure many companies will face from tariffs.

According to Lerner, upside based on valuations and technical levels appears capped near term at around 5% from current levels.

(Terence Gabriel)

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