Barclays believes earnings can still backstop equities against higher rates, while much lowered Q1 estimates offer room for beats.
The bank said in a note this week that estimates have been cut sharply year to date and are now lower than the actual Q4 growth numbers despite improving global economic momentum.
"The bar for beats is thus low, in our view," wrote the bank. "However, that alone might not be enough to generate the strong positive price action seen last quarter, as the year-to-date re-rating has left equities looking ahead of earnings, although the recent pull-back has reduced froth."
Analysts added: "Re-rating is not unusual at this stage of the cycle, but amid a renewed surge in rates and geopolitical uncertainty, a lot depends on the quality of earnings, positive guidance, and buybacks to revive the positive price momentum."
So long as improving activity data keeps an FY24 earnings recovery on track, Barclays believes buying the dip "may work." However, they note the re-rating leaves little margin for error, particularly for Cyclicals.