P/E multiples will be in flux for the next few months. Phase I will begin in October. Phase II will begin in January.

The sequence will look something like the following:

Analysts:

• Many sell-side analysts will revise their December quarter Revenue and Earnings estimates downward coming off of the September quarter earnings calls beginning in mid-October.
• Some sell-side analysts will revise their full year 2023 estimates downward.
• Many sell-side analysts will wait for companies to provide formal 2023 Revenue and EPS guidance on the December quarter earnings calls (beginning in January 2023), before they lower 2023 estimates.
• The sell-side community knows what is coming. The problem is the analyst community lacks backbone. They are afraid to publish weak 2023 estimates for fear of pissing off the companies they cover and risking I-Banking revenue in the process.

Companies:

• On the September quarter earnings calls many companies will speak of limited visibility (some already have), recession risk, global inflation/higher interest rates/higher cost of capital, currency headwinds due to a strong Dollar, geopolitical risk and the like.
• Unfortunately, many companies won’t have this honest conversation with investors and will wait until they provide formal 2023 guidance on the December quarter earnings calls, thus delaying the inevitable.

Stocks:

• Therefore, given that some companies will provide negative commentary in October while others will wait until January, earnings estimates and stocks will move lower in two phases. The first phase will begin in October (lower “e” followed by lower “p”). The second shoe will drop in January.

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