Categories: Market Overview

This is one recession where stocks can actually make you money

Corporate America has a summer horror flick for you: an earnings recession. An earnings recession is two successive quarters of earnings-per-share decline. Such a decline is projected to not only have occurred in the second quarter of 2019, but is also forecast for the third quarter.

In fact, earnings recession fears may be overblown, as the stock market historically tends to do better when earnings are declining than advancing. That’s because an earnings recession increases the likelihood that the Federal Reserve will reduce interest rates. And, unless corporate profitability falls completely out of bed, investors love lower rates more than they hate slower earnings growth.

The last several quarters are a textbook illustration. During the fourth quarter of 2018, when corporate profits were mushrooming, the S&P 500 SPX, +0.29%   slid 14.0%. In the first quarter of this year, in contrast, when the year-over-year EPS growth rate was negative, the S&P 500 rose 13.1%. In the second quarter, for which FactSet projects the EPS growth rate to be minus 2.6%, the S&P 500 added another 3.8%. When year-over-year earnings growth was above 20%, in contrast, the S&P 500 gained an average of just 2.6% annualized.

This is one recession where stocks can actually make you money, MarketWatch, Jul 03
The FxPro News Team

This team of professional journalists announces the most interesting and influential articles from the major financial media as a brief summary. All such news may have sufficient potential to affect the course of trading assets.

Share
Published by
The FxPro News Team

Recent Posts

EURCHF Wave Analysis 20 December 2024

- EURCHF falling inside minor impulse wave 5 - Likely to fall to support level…

3 days ago

USDCHF Wave Analysis 20 December 2024

- USDCHF reversed from resistance zone - Likely to fall to support level 0.8860 USDCHF…

3 days ago

The US dollar ends the year on a strong note

The US dollar is at two-year highs. Factors such as changes in the Fed's monetary…

3 days ago

How deep will crypto dive?

The crypto market is experiencing a decline, with a potential further drop in value. Bitcoin…

3 days ago

EURGBP Wave Analysis 19 December 2024

- EURGBP reversed from support zone - Likely to rise to resistance level 0.8300 EURGBP…

4 days ago

EURJPY Wave Analysis 19 December 2024

- EURJPY broke resistance zone - Likely to rise to resistance level 165.00 EURJPY currency…

4 days ago

This website uses cookies