U.S. Stock Earnings Upgrade Cycle Ends, Breaking the Longest Five-Year Consecutive Rise
nashnova research
Wall Street analysts downgraded U.S. earnings expectations for the first time in 23 weeks, ending the longest upgrade streak since September 2021; inflation and rate hikes are now eroding corporate profit outlooks.
How did the five-year-long streak break?
The Citi earnings-revision index shows downgrades outnumbered upgrades for the first time in 23 weeks.
This means → the consensus that U.S. companies would keep earning more is cracking; the optimists no longer dominate.
The upgrade cycle had been running since September 2021 — the longest such streak in nearly five years.
Which sectors cracked first?
Stephan Kemper, CIO at BNP Paribas Wealth Management Germany, identified consumer staples, consumer discretionary, materials, and financials as the epicentre of downgrades.
In plain terms = food, clothing, industrial raw materials, banks — every sector tied directly to daily spending and borrowing costs.
Kemper attributed the shift to rising living costs and higher energy prices squeezing both corporate margins and consumer wallets simultaneously.
How much further could stocks fall?
Morgan Stanley strategist Michael Wilson warned the S&P 500 could drop as much as 7% if valuations keep sliding and energy prices push monetary policy tighter.
This means → his concern is not a single shock but a chain reaction: shrinking valuations + rising energy costs → even tighter policy.
Wall Street's broader view on full-year earnings remains positive, but bearish voices are getting louder.
Is the macro backdrop helping or hurting?
The OECD's latest report projects global inflation in 2027 will exceed earlier forecasts, requiring tighter monetary policy.
The Fed raised U.S. rates for the first time in three years earlier this month, responding directly to price pressures.
In plain terms = the signal from central banks worldwide is clear — rates will stay higher for longer, borrowing costs are rising, and whether earnings expectations can hold up is the market's next defining question.
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