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… And than came the profit downgrades

Aug 02, 2022

We have been arguing for quite some time that analysts would eventually need to revise downwards their profit forecasts in light of the abundant concerns from slowing economic activity, higher interest rates, inflation, supply chain bottlenecks to high commodity prices. Bloomberg columnist John Authers showed this morning the below graph from SG Research summarizing the situation well for Nasdaq and the S&P 500. It is worthwhile to point out that estimated profit growth for the S&P 500 ex the energy sector is rapidly heading towards 0%. We conclude that, despite the relief rally in July, equity investors should keep our seatbelts tightened and stay defensive.

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