Our latest review shows that the impressive recovery in our earnings revisions work has finally cooled, somewhat. After a nearly uninterrupted period of improvement from 3/20 through early September, it’s not surprising that a pause occurred. Especially since the domestic economic re-openings stalled during August.

With that said, our medium-term bullish outlook remains unchanged. By itself, a slowing of earnings revision metrics would spell trouble for the individual stocks that experienced rollovers in our proprietary Analyst Sentiment Measure (“ASM”) as well as for the overall market. However, context is important.

If these small roll downs were occurring late in a cycle when the Fed was moving towards a tighter monetary policy backdrop, we would most certainly be shifting to an early bearish stance. That is not the case. This is the beginning of a NEW earnings cycle, and the Fed has made comments that it is likely on hold for quite some time. Thus, the recent minor deterioration in the earnings revision backdrop is likely just a dip in an ongoing multi-year uptrend.

Going forward, I expect the environment to shift from a beta market to a more typical alpha market where idiosyncratic factors become important again, and it will critical to be in the right stocks...

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