Global Earnings Revisions — Market Going “ex-Growth“? This chart shows the breadth of earnings revisions momentum (ratio of upgrades to downgrades and rate of change in forward earnings) across all the countries that the data is available for (using Refinitiv I/B/E/S data—the gold standard in analyst consensus earnings estimates). Basically it shows the pulse in earnings revisions at a global level.
The key point is across countries there is a clear loss in earnings momentum. There was the initial drop during the pandemic panic, followed by a massive surge thanks to stimulus and reopening. Pandemic winners e.g. tech, also saw a substantial one-off surge in earnings as the global wave of lockdowns and work-from-home triggered a mass-adoption of tech and sped up a number of existing trends.
But now those tailwinds have been and gone, and what’s worse: the past stimulus tailwinds are now turning to headwinds as central banks hike rates, bond yields surge, and cost pressures bite as an inflationary shock takes hold. And for earnings growth, we know the base comparator matters, and now the hurdle for achieving the same rate of growth has been set higher.
In many ways then the market is moving into a period of “ex-growth“, as those past boosters to earnings now come home to roost as long-term symptoms of the pandemic. You might say that earnings are set to suffer the effects of long COVID! With that comes the end of the stimulus driven bull market.
Key point: Global Equities risk further downside as the market goes ex-growth.