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% 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%, the lowest reading since late 2015, according to Absolute Strategy Research, which surveyed investors managing $5.2 trillion of assets on their expectations. According to Refinitiv, earnings in Europe should rise by 15.2% in 2022 and by 4.1% next year while in the United States they should climb 10.8% and 9.1% respectively.
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