The Bear Warning | The Impending Stock Market Crash.

okay we just need to find something

bearish to talk about oh I know how

about earnings let's talk about

potentially the first signs of eps

weakness as macro momentum cools

actually that's just a straight up title

from Bank of America Securities here

let's try to understand what they're

complaining about here and essentially

this two-page report complaining about

earnings per share weakness

stock 600 12 month forward EPS level has

reached an all-time high in June held by

the rebound and Global growth that's

forward earnings per share all-time new

high in June great

stocks 12 month forward EPS expectations

earlier this month hit an all-time high

of 37.5 Euros following a six percent

rise from the January low the key driver

in the upward revisions to EPS was a

sharp Rebound in global growth since May

uh well wait where's the weakness then

because so far that's pretty good right

rebound and Global growth since Q uh

since Q4 of 2022 Global pmis Rising by

six points since December to a 14-month

high of 54 in May at a sector level

upgrades were largely driven by Banks

which have accounted for 40 percent of

the rise since she anywhere oh what is

this yet the latest data points to A

Renewed rollover in EPS most likely in

response to the weakening Euro area

macro momentum after a period of strong

upgrades stock 600 12-month forward EPS

expectations have recently started

seeing renewed downgrades like likely

due to a weakening in the Eurozone

momentum

uh Euro area pmis down four points since

April so in other words sort of peeking

out in April and a recent surprise is

hitting a three-year low now consensus

EPS expectations fading with 2023 stock

600 EPS growth falling to a new low of

zero percent boy it really feels like

they're writing a piece here out of both

sides of their mouth because on one hand

it's like look how great everything is

oh but recently things are weakening

again

why would these things be weakening and

maybe is there a chart that can help us

show this spoiler yes there is we're

going to talk about that we see scope

for weakening in earnings Outlook to

intensify uh in response to

deteriorating Global growth so let's

understand this if we're looking at

deteriorating Global growth momentum and

this potential further weakening then

you could end up seeing more of an

earnings recession in Europe and so I

want to see how does this look chart

wise and how's their stock market

reacting to this so uh and why is this

happening well they argue that a more

tightening coming especially with

tighter credit conditions and the lags

that we've been expecting although we've

been talking about lags for like a year

and a half now and it just feels like

it's taking forever to actually show up

uh B the likely fading of Tailwinds that

have offset credit related growth this

would be like your excess savings that

basically let you spend through uh

tighter economic period

and uh ultimately a a fading of some of

that stronger fiscal support that you've

gotten uh in the U.S and the Euro area

so what does this look like chart wise

well here it is these are the

expectations going forward if we look at

EPS growth and sales growth uh we get

the the numbers here

the first one I think that's worth

looking at is the 2023 EPS growth and

the 2023 sales growth so those are going

to be your blue lines not your Grays so

go over here you've got EPS growth

essentially turning to negative you can

see some of the uh the recovery you had

briefly coming out of last year this was

sort of your uptrend in January February

although we've recently trended right

back down and so this is really

representative of flat earnings per

share growth this would be your EPS

growth this would be your sales growth

but with higher costs you're basically

at zero growth in earnings

now what's remarkable is even though

these numbers are so low for 2023

2024 sales growth is just here but look

at the explosion expected in earnings

per share growth for next year so even

though we might be flat on EPS for 2023

if you get out of the stock market now

because you're worried about 2023

earnings you're missing what could be

seven to ten percent EPS growth next

year which is remarkable that's really

good growth as a result what is

something like the Dax doing in Germany

well even though it's near all-time

highs uh it's basically just chilling

out into your all-time highs and trading

sideways which is not bad I would not

mind that at all if you go back at the

max look at the Dax you can basically

see we hit all-time new highs uh we're

basically at December of 2021 levels for

the Germany stock market and there were

about a 2023 EPS decline like this is

really all the Bears can give us this

horribly bearish news is leaving us with

the Dax that's up 10 for the last six

months year to date up 13 year over year

up 28 five years also up 28 and then out

to the max here I mean obviously you can

see you're at all-time highs here so

it's kind of neat though to see this

because remember our favorite bear Mr uh

Micah Wilson over at Morgan Stanley what

does he always say he always says Hey

EPS recession coming buckle up but wait

a minute if you're gonna buckle up for

the EPS recession what that's saying is

you're wanting to sell because you're

worried about those low 2023 numbers on

this chart which again to make that very

very clear are these numbers right here

and because you're so worried about

those 2023 numbers you'd be willing to

give up these delicious 2024 numbers

there in purple it's just

just doesn't make logical sense but okay

whatever what do we have over here this

is the forward EPS look and sure you can

see some recent decline here in the

level of eps but you know when I think

people so frequently forget is look at

the trend where we previously were I

want to manipulate that line I'd like to

get something like uh no

oh oh good notes it's being funny look

at that I can move the highlighting I

don't want to move the highlighting I

just want to be able to draw a diagonal

line there we go here's probably your

Trend well let's there we go let's try

to get a little bit of a trend line on

what we had previously there's your

previous Trend this purple line so

you're just now barely breaking through

this trend and quite frankly if you

don't look at Trend and you just sort of

look at this on a nominal basis what do

you find well you find that you're

actually still quite a bit above what

you previously had in terms of a level

of earnings per share and I think it's

easy to forget and we have grown a lot

where this whole green box above what we

were in 2017 1819 which is fantastic but

yeah some decline potentially below

Trend here and I expect some volatility

but then again this is also just a

scenario it's not actually what's

happened yet but what's important about

this is if this is what the market is

pricing in this sort of decline

and what you know what if we end up

bouncing at Trend here if the market is

pricing in that kind of pain and the

stock market's just laughing it off hey

that's great

here's another one Ford EPS versus the

global composite uh new orders that's

the darker Blue Line not that important

uh over and undershoots of eps analysis

versus inflation uh this just gives you

an idea of Euro area

expected headline CPI you can actually

see it's it's expected to potentially go

negative by 2024 which is great uh on a

three month change basis

and then you have the uh stock 600

forward EPS less the uh macro hit in the

light blue line all right not that big

of a deal uh some more charts here

giving you a little bit of a look my

favorite one here as well on margin

projections just showing you that the

the markets are basically already

assuming that margin growth is going to

fall uh that uh or sales growth EPS

growth everything's expected to rotate

down but again look at what the stock

market is actually doing so I always

scratch my head over this I'm like man

the the Bears are so bearish but the

Market's already assuming this and it's

still doing well

so where's the surprise I don't know who

knows I think that's where the Bears are

really uh relying on some form of a

Black Swan but in terms of actually

seeing something right now it's tough to

find tough to find something to be

bearish with so anyway I always like to

cover something bearish every day I'm a

big fan of sharing perspectives that's

exactly what I do when the courses on

building your wealth link down below my

goal is to wake you up when it comes to

investing in stocks or real estate or

making more money as an entrepreneur

self-employed whether it's understanding

how attorneys work CPAs work Realtors

work how the game is played how to build

your wealth guarantee you'll find

something in there that changes your

perspective and helps you build wealth

so check it out I'll link that down

below and that's my take on uh the bear

piece

priced in EPS pain that the stock market

just right now doesn't seem to care

about which again also makes intuitive

sense because you're really going to sit

out 2023 because you're so worried about

2023 that you're potentially willing to

be mispositioned going into 2024 because

remember it's not as easy as like sell

now and just got back in January 2024

usually the stock market starts

pre-pricing in good news or bad news

ahead of time which means maybe that EPS

downgrade is already priced in whereas

the upside of 2024 is just now being

priced in

now I want you to know this when it

comes to AI time is what's going to make

you money and if you can prove that

value to an employer you'll always be

able to be employed so this is another

way of making sure that you don't get

replaced but

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