Weekly Signal & Noise Filter
Pinebrook Will Fade the Growth Scare, Again
U.S. yields down.
Sideways/flat choppy equity markets.
Political noise about tariffs, more tariffs, DOGE, and, and and….Ukraine.
Growth scare deez nutz. 🥜🥜🥜
The recent narrative of slowing growth is a relative one. Relative to expectations. The question is, what were the legacy expectations and to what degree will they be re-rated? If we can answer this, we will know where the asset puck is going.
We start with the earnings picture.
Q4 2024 earnings estimates keep improving.
Q1 2025 earnings estimates keep getting worse.
Q4 2024 earnings are currently expected to come in 6.04% higher than what was expected at the end of 2024.
However, the Street has cut Q1 2025 estimates by 4.17% versus what was expected at the end of the 2024.
Thus, the sequential quarter-to-quarter expectation has gone from a 2.15% expected increase at the end of 2024, to a current decrease of 7.69%.
This represents an 9.83 percentage point fall in sequential quarter-to-quarter expectations, which has been getting progressively worse since the start of the calendar year.
Last year’s Q4 to Q1 sequential delta was +1.6%, and the Q4 to Q1 sequential average has been 2.6% since 1990.
The last time there was a Q4 to Q1 sequential drop in earnings was in Q1 2022.
Putting aside recency bias or technical analysis applied to the earnings cycle, the real concern isn’t a bear market repeat of 2022. The market has come to terms and priced a Q1 2025 earnings whiff.