Analysts at UBS have lowered their year-end $S&P/ASX 200(.XJO.AU)$ market target from 7700 to 7000 anticipating earnings are on a course to follow equity prices lower.
They now assume cuts to earning estimates through to early next year.
The reduction implies a 5 per cent return from today's price of around 6740 and a 6 per cent drop for the calendar year.
Top-down, markets have already largely adjusted to a more downbeat macro story: stocks have de-rated, in some cases considerably, whilst bonds now seem to be near their ceiling,
-UBS strategist Richard Schellbach said.
But with the baton now being passed onto earnings downgrades, equity prices will be forced to fight against a more negative bottom-up story.
Analysts remain overweight on resource and consumer staple stocks. They've switched consumer discretionary to underweight given they "are not inclined to fight what looks like a vicious earnings downgrade cycle hitting the sector.