earnings recessions: Brian Belski, chief investment strategist at BMO Capital Markets, doesn't see an earnings recession in the offing, according to Market Watch. Nevertheless, he took a look at the historical record around past earnings recessions in a Thursday note. Read Stock market may be in for a rude awakening as earnings growth hits a wall, warns strategist But they might take comfort from history, which shows that past downturns in earnings per share, or EPS, including six straight quarters of falling profits in 2015-16, didn't necessarily spell doom for the stock market or that an economic recession was imminent. His analysis found there have already been two earnings recessions during the current bull market, including the 2015-16 episode, with neither resulting in an economic recession nor the end of the business cycle. When BMO analysts took a look at consensus quarterly EPS growth estimates for 2019 and subtracted the usual drawdown that occurs from the end of January to the beginning of each quarter, they found earnings on track for small year-over-year declines for the first and third quarters, slight growth for the second quarter and 6% growth for the fourth quarter. For that matter, he said, four of the last six earnings recessions didn't coincide with or lead to an economic recession see chart below . BMO Capital Markets Caption outside of wrapper for normal article images So what does happen to earnings during recessions Digging deeper, Belski found that economic recessions have typically coincided with significant year-over-year drops in quarterly corporate profits.
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Tagged under earnings recessions, market topics.