Do Earnings Adjustments Signal Bear Markets?

earnings adjustments a warning sign? An equity research note from Barclays published this morning points out that the current spread between adjusted and GAAP earnings for small caps is wide by historical norms.

Now, the widening gap between GAAP figures and adjusted numbers has been causing concern for some time as the difference between these two accounting metrics is generally considered a rough proxy for earnings quality. A widening spread indicates that investors have to view public company accounts with increasing scrutiny.

Reporting Season: Q1 Marks Darkest Hour Just Before The Dawn, Says DB

However, alongside the accounting issue a more ominous theme is starting to emerge. Historical trends suggest that wide divergences in earnings spread are often accompanied by (or signal)...