What is truth?

Blink and you missed it. With stocks surging back to green and CNBC celebrating, one could be forgiven (were on a goldfish) for believing everything is truly awesome again. However, as Deutsche Bank details, there are ten good reasons why this is far from over…

As Deutsche’s David Bianco explains, here are 10 reasons why the S&P likely dips 5-10% or possibly more before any sustained recovery…

1. Poor S&P 500 sales and EPS growth, even ex. Energy

Amid low commodity prices, the stronger dollar, weak investment spending, weak exports and slower foreign markets, S&P sales growth has been poor, even ex. Energy

2. Demanding valuations vs. history, especially ex. big Banks and Tech

3. Plunge in commodity prices has taken another significant down leg

4. Strong dollar with further upside likely even upon modest Fed hikes

5. Subpar US growth trends with weak productivity and investment

6. US and DM acceleration unlikely to offset slowdown in China and EM

7. Record high S&P margins, approaching record years of EPS growth

The GAAP/non-GAAP S&P EPS ratio deteriorated from 94% during 1Q13-3Q14 to 78% the past 3 quarters. Loss on asset sales, asset/ goodwill impairments and restructuring costs lowered the ratio significantly at Energy, Industrials & Materials. Higher M&A costs and excluded stock compensation dragged the ratio lower at Tech, Staples & Healthcare. Pension losses lowered the 4Q ratio too. The S&P avoided down EPS in 1H15, up ~2% y/y on non-GAAP EPS, but the GAAP EPS declined by 13% y/y. We have always argued that the best EPS measure lies somewhere between GAAP and non-GAAP EPS.

full article at source:http://www.zerohedge.com/news/2015-08-24/deutsche-banks-10-reasons-why-market-going-lower

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