Highlights:

• The US earnings momentum has been resilient so far, and the Q3 reporting season is expected to see a reduced but still positive yearly growth. Ex-Energy expectations receded by 9pp since the end of June to -3.5% yoy, leaving scope for positive surprises vs. analysts’ expectations.
• Still, we expect the tone of firms’ guidance to be more subdued compared to Q2. We estimate 2023 earnings growth to be at +2% yoy for the US and nearly zero for EMU.
• Our earnings forecasts (based on macro models and finetuned by qualitative considerations) are below consensus, mainly due to the ongoing surging costs and negative GDP revisions, and the risks are heavily tilted to the downside.
• The gap vs IBES in 2022-2024 is increasing from -3% to -11% and -7% to -15%, for the US and EMU, respectively. In a severe scenario, 2023 yoy growth in the US is at -5% and at -10% for the EMU.
• PEs are likely to be further downgraded due to the high real rates and deteriorating financial conditions. But, as earnings are also most probably at risk, we see our underweight equity position to be justified in the short term.
   

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