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.