U.S. Manufacturing Conditions Worsen Most Among Major Economies
U.S. Stock Market Valuation Hits All-Time High Based on PBR
Focus Shifts to B2B-Oriented AI, Power, and Robotics
The United States is entering the final stages of its tariff negotiations. As American companies that had responded with pre-orders are now reducing imports, a demand gap is emerging. With the U.S. stock market valuation reaching an all-time high, there is growing attention on companies focused on B2B business.
High Valuations Make the U.S. Stock Market Vulnerable to Negative Factors
On August 6, Yuanta Securities pointed out in its report "The Bill Arrived Late" that the global manufacturing Purchasing Managers' Index (PMI) for July has re-entered contraction territory, with only 6 out of 25 countries remaining in expansion. This is the lowest level since December 2023, when concerns about an economic recession were widespread. In particular, the U.S. saw a 3.1-point decline, marking the sharpest deterioration in manufacturing conditions among major economies.
Recently, the price-to-earnings ratio (PER) of the U.S. stock market has returned to levels similar to those seen in February, when valuation pressures became apparent. In terms of price-to-book ratio (PBR), it is approaching an all-time high. This makes the market especially vulnerable to even minor negative events. In fact, the average share price adjustment for companies that reported earnings shocks during the second-quarter earnings season was -5.6% in the two days before and after the announcement, the lowest since the third quarter of 2020. This is significantly lower than the five-year average of -2.4%.
B2C Stocks Decline, Time to Bet on B2B Companies
Although there was a non-farm employment shock in July, the factor that has further intensified valuation pressures on the U.S. stock market recently is consumer spending. First, it has been confirmed that consumption and credit conditions among low-income groups are deteriorating. In June, the wage growth rate for the bottom 20% income group in the U.S. was 3.7%, widening the gap with the top 20% group, which saw a 4.7% increase. The delinquency rate (over 90 days) on student loans in the first quarter surged from 0.7% in the previous quarter to 8.0%. Discount retailers such as Target and Bestbuy saw their stock prices plunge after reporting poor second-quarter results or weak guidance.
Consumer sentiment among middle- and high-income groups is also not positive. Stock price volatility is rising for companies such as Marriott International and Royal Caribbean Cruises, which had previously promoted affordable luxury. North American luxury goods traffic continues to decline. The slowdown in consumer spending has also led to divergent stock price trends among the Magnificent 7 (M7). Tesla, Apple, and Amazon, which have a high proportion of B2C business, are significantly underperforming the market, while Nvidia and Microsoft, which have B2B models, continue to play leading roles.
Min Byungkyu, global strategist at Yuanta Securities, analyzed, "The heightened valuation pressures and weakening consumer base in the U.S. stock market are the reasons for the recent trend of active funds taking profits in the U.S. and increasing purchases in European and emerging markets." He added, "It is necessary to focus portfolios on the AI Four (Nvidia, Broadcom, Microsoft, Palantir), which are presented as core leading stocks, and on themes with a strong narrative of the revival of U.S. manufacturing." Regarding the revival of manufacturing, he highlighted ▲power infrastructure and construction/engineering (PAVE ETF, Eaton, Quanta Services, Vulcan Materials, Caterpillar) ▲industrial automation and robotics (ROBO ETF, Rockwell Automation, Emerson Electric).
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
