Adam Parker states that tracking inventory builds will be essential in measuring performance during October earnings

**Title: How Long Will the Equity Market Bounce Last? Inventory Overloads May Impact These Sectors**

In this episode of ‘Squawk on the Street’, Adam Parker, the founder and CEO of Trivariate Research, joins the discussion on the duration of the current equity market bounce and the potential sectors that could be affected by inventory overloads.


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Adam Parker, CEO of Trivariate Research, joins ‘Squawk on the Street’ to discuss the longevity of the current equity market bounce and the potential impact of inventory overloads on certain sectors.

When analyzing the quarters following relief rallies, historical data indicates a mixed performance. Last week, we saw inventory builds in companies like Nike and Micron, which may prove to be a key performance indicator for October earnings. With production potentially exceeding consumption, margin and stock market implications become a concern.

Industrials, machinery, and semiconductors are among the sectors that could experience a negative impact. The supply chain disruption caused by the pandemic has prompted companies to order excessive inventory to ensure availability in the future. However, as production catches up with consumption, inventory buildup becomes detrimental to margins and likely has a negative effect on the stock market in the coming months.

The duration of this inventory buildup depends on the perishability of the overproduced goods. While some businesses may not suffer significant losses in pricing, others could face sharp declines, affecting their profitability. As a result, the consensus for next year’s S&P 500 earnings, currently 10% to 15% optimistic, may need to be adjusted downwards.

Recent data shows that S&P 500 earnings expectations have already decreased by 2.7% for the full year and 6.7% for the pending third quarter results. This downward trend should be closely monitored, along with companies’ guidance and projections for 2023.

Consumer companies in the S&P 500, regardless of their industry, have experienced unprecedented growth in the last three months. However, the question remains as to when this growth will taper off. The consensus of a bottom and recovery in 2023 may need reconsideration, as it may be too optimistic. Investors should focus on the relative achievability of estimates, with utilities and healthcare possibly presenting more achievable and affordable options.

In summary, the equity market bounce may be short-lived, and the effects of inventory overloads are likely to impact sectors such as industrials, machinery, semiconductors, and beyond. Stay informed with CNBC, the leading source for business news and analysis.

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Adam Parker, Trivariate Research founder and CEO, joins ‘Squawk on the Street’ to discuss how long the equity market bounce will last, what sectors could suffer from inventory overloads, and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO:

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