“It’s Bad” – Massive Earnings Downside Surprises Send Recovery Hope Into 2021 At Best

“Overall, earnings delivery continues to surprise to the downside versus consensus estimates, across all regions,” says JPMorgan strategist Mislav Matejka, noting Europe’s earnings-per-share growth for the first quarter is now down 25% year-on-year, while sales growth is 6% lower.

Simply put, it’s bad! … and not set to get any better anytime soon.

As Bloomberg notes,  with a majority of companies having now reported earnings in Europe and the U.S., the figures have been poorer than expected; and the second quarter will likely be even worse, given the lockdowns, and a recovery in the rest of the year isn’t obvious.

Things could get worse for cyclicals, which are more dependent on the economy, according to Citigroup Inc. strategist Robert Buckland. He expects global EPS to fall at least 50% this year, split between cyclicals down 65% and defensives 10% to 15% lower.

Overall, investors’ reactions to earnings misses have been relatively muted, according to Barclays Plc strategist Emmanuel Cau, adding that the low positioning has likely helped, but then so has the ubiquitous Powell Put.

“The progressive end of lockdowns and the retention of some social-distancing measures is setting up only a moderate economic rebound in the second half and pushing an earnings recovery to the first quarter of 2021, when the comparison base will be much lower” according to Bloomberg Intelligence strategists Laurent Douillet and Tim Craighead.

With futures forecasting The Fed to cut rates to minus-40bps in Dec 2020, is it any surprise that analysts are pushing off recovery hopes?

If the market is expecting rates to be cut that low (and most critically negative) how can stocks be where they are now…?