MILAN : The upcoming corporate earnings season could prompt another sharp fall in global share prices with profit forecasts looking far too upbeat given mounting recession risks, investors and analysts warn.
Emmanuel Cau, a strategist at Barclays, said earnings were"taking over from valuations as the next market driver". He said his firm had been cutting equity exposure and boosting cash in anticipation of a 15-20 per cent market decline. JP Morgan kicks off U.S. earnings on Thursday, with the season in Europe starting the following week.
The probability global corporate earnings will be higher in a year's time has tumbled to 37 per cent, the lowest reading since late 2015, according to Absolute Strategy Research, which surveyed investors managing $5.2 trillion of assets on their expectations. Economists have raised the odds of recession in the United States and Europe, citing aggressive interest rates hikes and the war in Ukraine, yet earnings forecasts for this year have continued to rise since January.