Deutsche Bank strategists suggest that the consensus estimate for U.S. fourth-quarter earnings has become overly pessimistic, potentially paving the way for significant positive surprises from corporate America.
Despite the fourth quarter being seasonally strong, the team anticipates a 7.4% decline in S&P 500 earnings per share compared to the third quarter. This rate of decline is noted as one of the worst on record outside of recessions when analyzed on a quarter-over-quarter basis.
In their analysis, the strategists emphasize the expectation of robust growth that could lead to “big beats over overly pessimistic consensus”
“We see solid double-digit year-on-year growth partly boosted by base effects”
However, they also caution that the typical earnings-season rally might be tempered by the market's steep climb and existing equity positioning.