From Business Insider:
ALBERT EDWARDS: The Markets Will Become Locked In A 'Freddy Kruger-Like' Nightmare That Takes Stocks Down To Levels Not Seen In A Generation
Amid the turmoil in the emerging markets, Societe Generale strategist Albert Edwards is as bearish as ever.
"Our warnings throughout last year that an unravelling of emerging markets (EM) was the final tweet of the canary in the coal mine have still not been taken on board," he wrote in a new 6-page note to clients. "The ongoing EM debacle will be less contained than sub-prime ultimately proved to be. The simple fact is that US and global profits growth has now reached a tipping point and the unfolding EM crisis will push global profits and thereafter the global economy back into deep recession."
Profits and profit expectations are ultimate what drive stock prices. And the worry is that fragile and weak profit growth is about to make a big turn for the worse.
"One thing [SocGen's Andrew Lapthorne] has been highlighting for some months is just how incredibly anaemic profits growth has been in both the developed and emerging markets, the latter being particularly poor having contracted for the past two years," wrote Edwards.
The widely followed measure of profit growth are adjusted or pro-forma, which often has the affect of boosting earnings. However, even these numbers don't look good. Check out this chart:
Societe Generale, Albert Edwards
Edwards pointed to this quote from Lapthorne:
Of course even these MSCI figures have been flattered by a reduction in the share count plus lower interest rates and tax charges....