Given the challenging market, I wanted to quickly provide and update on my research. As a reminder, I recently made a hard shift away from my longstanding bullish view in mid-March and I have been pounding the drum ever since on my new unfavorable forecast.

The earnings revisions backdrop, which had been one of my key supports for what was my medium term constructive view, began to weaken during my March deep dive ERM review and the May analysis that was done this week shows that it continues to broaden. 

First, it was only negative inflections, “less good”, but my key proprietary revisions indicator is clearly revealing that the deterioration is spreading, and now more and more names are heading towards the southern hemisphere as accelerating absolute cuts are now beginning.  I have been talking a lot with clients about my expectation that all things cyclical are at risk of estimates cuts going forward that will likely play out over the next 1-3 months, at minimum. 

My work suggests the combination of a hawkish Fed, elevated inflation, slowing growth, rising interest rates, strong USD, continued geopolitical tensions, and an expected analyst profit cutting cycle are creating significant headwinds for the US equity markets. 

With risk premiums...

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