CITI Quant Stregist: “Using a model based on market flows (large shorts / flow dominated by short covering), we find there is strong evidence that equity markets are indeed in the middle of a melt-up. Risks are now skewed to the downside with the expectation that equities will be 10% lower within 3mths. Meanwhile extending this model to

Aggregate Estimates and Revisions

20Q1 earnings are expected to decrease 12.0% from 19Q1. Excluding the energy sector, the earnings growth estimate is -11.3%.
Of the 430 companies in the S&P 500 that have reported earnings to date for 20Q1, 67.4% have reported earnings above analyst expectations. This compares to a long-term average of 65% and…[Read more]

GS, what they expect:
nonfarm payrolls declined by 24 million in April
unemployment rate rose from 4.4% to 14.0%
And:
In interpreting tomorrow’s report, we will pay special attention to the number and share of workers on furlough or temporary layoff.

CITI: too early for cyclicals
1. Since the sell-off started, the performance gap between global Cyclical (-21%) and Defensive (-10%) sectors has been 11%.

2. In the last five global downturns, the average performance gap between Cyclicals and Defensives has been 20%.

3. We think the current performance gap could double.

4. When to overweight…[Read more]