Goldman: THE GLASS IS HALF EMPTY, FRIENDO

Everything is skewed to the downside, according to David Kostin–War Chief of U.S. Equity Strategy, Goldman Sachs.

These are the three principle reasons for you to fear the coming ice’d-berg.

1. Energy and banks
“Our analysts have highlighted a laundry list of headwinds including energy counter-party risk, a slowdown in capital markets activity, and a bruising quarter for asset managers,” Kostin & Co. said. “We believe financials earnings per share [EPS}could fall by as much as 25 percent.”

2. Negative guidance
“Since 2006, roughly 20 percent of firms have provided ‘next-quarter’ guidance during earnings season and 73 percent of firms typically guided below consensus,” Goldman found. “Following the depths of the global financial crisis, guidance has grown increasingly negative, and has been worse-than-average since 2012.”

3.Corporate buybacks
Kostin believes the gravy train of equity buybacks is ending: “a meaningful reduction in what is currently the only source of net demand for U.S. shares.”

In summary, the outlook for over 30% of the market is bleak and very dark, and also very dire. With regard to the financials, they’re diving–headlong–into cement pools, with earnings expected to be reduced by 25%. Moreover, this isn’t going to be a one-off event and companies are expected to guide lower, in droves, for next quarter. Lastly, corporate buybacks have run its course. They’ve been maintained at a pace that is unsustainable. The succor the markets have enjoyed with this seemingly endless support of prices has all but come to an end.

BEHOLD the earnings season to come. David Kostin believes you will enjoy it, immensely, similar to a horror movie or something much, much worse–a lifetime of Presidential campaign speeches.