Albert Edwards, Societe Generale's uber-bearish strategist, has once again taken aim at economists bullish on the U.S. economy, highlighting a contraction in corporate profits that could leave the country exposed to external shocks and an "inevitable" recession.
Edwards said economists used "dodgy" metrics to gauge profit and pointed to the MSCI Operating Profits Indicator - as the one measure that investors should watch.
This indicator – which tracks trailing U.S. company profits for the last 12 months - highlights the rate of corporate growth and is favored by Edwards over any outright profit level, rate of profitability or profit margin level indicator.
It's recent readings paint a gloomy picture ahead for the U.S. economy, according to Edwards. He said profits started declining in the fourth quarter, according to the MSCI definition, and that this was likely to lead to a slump in business investment.
"U.S. profits have begun to decline on a MSCI trailing basis," he said in research note released on Tuesday. "A decline in profits is inevitably followed by recession shortly thereafter, as investment, the most volatile of all GDP (gross domestic product) components, is cut."