Hidden Risks: Why Investors Should Scrutinize “Adjusted” Earnings Late in the Cycle

In Strategist’s Corner (Oct 2025), MFS Investment Management’s Robert Almeida warns that unseen portfolio risks often mirror hard-to-detect health issues—appearing only when it’s too late.

• As the business cycle matures, the gap between GAAP and non-GAAP earnings widens, with companies increasingly “adjusting” results to appear stronger.

• Decades of cheap capital encouraged financial engineering—buybacks, debt-funded M&A, and optimistic reporting—now giving way to real capex in AI, reshoring, and tangible assets.

• Almeida cautions that investors must scrutinize every earnings adjustment and prioritize firms with durable competitive advantages, as markets shift from “survival of the least fit” to “survival of the fittest.”

Are investors focusing enough on fundamental quality—or trusting numbers that hide risk? The full piece explores how to detect early warning signs in portfolios.