We expect US corporate profits to fall by around 7.5% this year as the impact of the wider economic slowdown more than offsets any boost to earnings from the weaker dollar. This is not yet fully reflected in equity prices. We therefore expect further falls in US equities in the first half of the year – with the S&P losing another 5-10% from current levels of around 1400 – before equities rally again as the economy starts to recover in the second half.
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