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JPMorgan Quants Say Sudden Earnings Gloom Spells Market Trouble

  • Upgrades by sell-side analysts are slowing, according to note
  • JPMorgan’s Chaudhry says risk of downgrades is increasing

Expectations about corporate earnings growth are quickly diminishing, JPMorgan Chase & Co. quant strategists said, warning that the gloom could spell more trouble for global stock markets after an underwhelming start to the year. 

“Yes, there are still net upgrades, but the pace of these upgrades are very quickly nearing net EPS downgrade territory,” quant strategists led by Khuram Chaudhry wrote in a note. Such earnings-per-share cuts “frequently lead to major shifts in risk/reward and increasing equity market volatility,” he said.