Equity Sector Views: Lower Earnings Outlooks Spell Trouble
- By John Tierney
- 4 min read
Summary
- Analysts are finally starting to cut year-ahead earnings forecasts. The S&P 500 EPS is 1.2% lower than in early July. The communications, consumer discretionary and technology sectors have registered the largest cuts.
- Energy is the one sector where earnings outlooks have increased, by a whopping 8%. We strongly reiterate our overweight position on energy.
Market Implications
- If the economy remains sluggish during 2H, as we expect, earnings projections will continue to be cut.
- We think the S&P 500 is overvalued now; further reductions in earnings would lead to a renewed selloff and second leg of the bear market.
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