Markets remain focused on 2-3 rate cuts from the Fed, growth not rolling over fully, and inflation continuing its downward trajectory. There seems to be no way to change this narrative among market participants. The slightly hawkish PCE in the US and today’s relatively high German inflation print (in harmonized terms) had a hard time moving rates markets, which are currently pricing more than 2.5 cuts from the Fed and more than 2 cuts from the ECB by year-end, with Fed September pricing even showing a tiny lean towards 50 bps.

The growth side of the question is a less dominant factor for markets, as seen by the data on both earnings and price target revisions. Despite earnings estimates over the last 100 days being revised down for all equity sectors besides Technology and Consumer Non-cyclicals, we are seeing broad agreements from analysts that the path of travel is north in equities, with price target revisions still net bullish.

Chart 1.a: Price target revisions are net bullish

Chart 1.b: But earnings revisions are net bearish..