If we want to understand whether the recent bounce is a true buying opportunity we need to believe that stocks are cheaper.

We need to look at the S&P 500 and the Stoxx 600 multiples, which suggest that forward Price to Earnings has not fallen nearly enough, and has returned barely to 2018 levels, which were already elevated.

The earnings season also shows us the poor level of growth in sales and earnings almost in every sector. Considering this earnings’ season has only included two weeks of lockdown, the severity of the second quarter hit may be underestimated.

Consensus estimates for 2021 earnings also seem surprisingly bullish. We need to understand that the 2020 downgrade cycle may be partly discounted by the market, but the 2021 downward revision of earnings estimates has barely begun.

Guidance, dividends and buybacks are being slashed, therefore we need to be very selective and look at opportunities knowing the depth od earnings’ revisions ahead and the impact of the crisis on cash flows and margins.