Five Reasons For Caution In US Equities

Submitted by Tyler Durden on 05/07/2012

While there may be a plethora of geopolitical reasons to be 'cautious' of getting over your skis in US equities, there are a number of more quantifiable reasons for not buying-the-f##king-dip here. Between the sustainability of US earnings and the sell-in-May mantra, we highlight five foods-for-thought before you push all-in this morning. Of course the only bullish reason left is Central-Bank-driven and remains the elephant in the room but as we get closer and closer to the election, the Fed will be increasingly snookered and require a market plunge of more than 1.5% to step in and save the civilized world with S&P 500 1285 as a target for Fed action based on last Summer's excitement.

The S&P 500 sold off quite handsomely the last two Summers - notably in the lead-up to post-Fed action...

While macro data continues to deteriorate rapidly...

And while Q1 earnings surprised from notably marked down expectations - the sad truth is that this supposed strength is absolutely ignored by the analyst community when it comes to forward guidance which has not changed at all...

and if you are told that stocks are cheap - they are not - with non-cyclicals at a post-crash peak in forward P/Es and Cyclicals in the middle of their range, it is clear that stocks are far from relatively attractive...

and finally, relative multiples have contracted for economically sensitive stocks throughout the recovery - despite supposedly superior company results - suggesting a general lack of belief in the sustainability of any economic growth story...