April 24, 2020

Fathom’s Chart of the Day 24.04.2020: Earnings down but not enough

by Fathom Consulting.

Equity markets remain volatile amid sharp deteriorations in economic data and investors slowly digesting the impact of the virus on earnings reports. Comparing current analysts’ earnings revisions to the peak-to-trough revisions in the previous two recessions betrays a significant level of optimism in today’s valuations. Outside of Europe, in particular, earnings expectations appear especially conservative given the magnitude and uncertainty associated with the current pandemic and compared to a relatively benign recession like 2001. While market prices tend to bottom two to three months before earnings expectations, it is possible that these modest earnings revisions may not be consistent with a market trough yet.

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