Amid a sell off that erased more than two years of gains from global stocks now on the brink of a bear market, at least earnings stood as a potential bright spot. Those hopes are fading. Analyst profit downgrades outnumbered upgrades by the most since 2009 last week, according to monthly data from a Citigroup Inc. an index that tracks such changes.
Last week the chancellor George Osborne hinted at trouble ahead, does he have a better insight to the future market trend, hardly, or does he expect growth to be stifled and what plans does the government have in place when it happens to remove the possibility of another recession.
Declines in oil and other commodities, the withdrawal of Federal Reserve support, Europe’s fragile recovery and China slowdown fears are combining to jeopardise one of the few remaining stock catalysts after a global rally of as much as 156% since 2009. And profit growth estimates are still too high for this year and 2017. Investors are running for the door, they pulled about $12 billion from global stock funds last week, and the MSCI All-Country World Index is near its lowest level since August 2013. The Footsie 100 is still below 6000 since the middle of December last year and the rallies have been minimal.
Economists’ projections for worldwide expansion in 2016 have dropped steadily in the past months to just 3.3%, with estimates for China and the U.S. falling since the summer. The biggest bears are getting more bearish.