"Investors are terrified of making the same mistakes as they did in 1989- 90, when they ignored reductions in Gross Domestic Product forecasts at their peril," says analyst Robert Buckland in his 1995 Profits Pathology. "However, the current situation is much more like 1984-85 when a mid-cycle slowdown was achieved without a collapse in corporate profits."
Mr Buckland argues that the downgrading of more cyclical companies has therefore been overdone. There is scope for raising profits forecasts in some sectors such as engineering and vehicles, he believes. Any reduction in interest rates would provide further help too.
The interim reporting season for companies with calendar year-ends has been characterised by profits coming in ahead of forecasts. Yet analysts are reducing more forecasts than they are raising.Reuse content