If you’re looking to capture the “essence” of the current cycle, you needn’t look much further than the explosion in non-financial corporate debt and the concurrent bid for equities from corporate management teams. They have gone hand in hand. Cheap debt has aided corporate management to fund share buy backs which in turn has boosted EPS growth, in fact, 30% of total EPS growth in the last five years was derived from share buybacks alone, says Bank of America. They’ve been helped by Central Banks, who have kept rates so low for so low. What could break this virtuous circle? In this note, BAML warns that consensus EPS growth is far too optimistic, and in an environment where at a global level we are in the midst of a demonstrable downturn in global manufacturing, precipitated by rampant geopolitical uncertainty and the seemingly intractable trade war. Should that worsen, BAML imagines that corporate management teams will eventually decide that retrenchment on all fronts is preferable, especially given the prospect of an Elizabeth Warren presidency That retrenchment is precisely what BAML is concerned about. They say it is only going to take a few percentage points to be shaved off of the current modestly negative earnings growth for the psychological barriers to be broken, where consensus shifts away from describing this episode as a mid-cycle slowdown to something more meaningful.