Slowing momentum in global earnings could reign in stock prices, warns iBCA Research in a new report.

“The ongoing deterioration in global forward earnings momentum will weigh on stocks in the months ahead,” the firm declares in a new report, noting that, “The steady improvement in analysts’ profit expectations that underpinned the early phase of the equity rally is reversing.”

“The 3-month change in forward earnings has slipped markedly in recent months, as has the earnings revision ratio. History suggests that the analyst earnings revision cycle bottoms only when downgrades substantially outnumber upgrades,” it adds. “The implication is that further cuts to profit forecasts lie ahead, especially since analysts still project double-digit EPS growth, which is optimistic given the economic outlook.”

“The earnings backdrop is becoming less favorable for global equities, reinforcing our view that the cyclical bull market is in the late stages,” it concludes.