Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

This Kind Of Earnings Recession Always Triggers A Bear Market

Published 07/28/2016, 03:25 PM
Updated 07/09/2023, 06:31 AM

Knee-deep into earnings season and it looks like, as a group, corporate America still can’t find the end of its earnings decline since profits peaked over a year ago. What’s more, analysts renowned for their pollyannish expectations, can’t seem to find it either.

So I thought it might be interesting to look at what the stock market has done in the past during earnings recessions comparable to the current one. And it’s pretty eye-opening. Over the past half-century, we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices -- a metric many use to define a technical 'bear market'.

Corporate Profits And Recessions

In other words, buying the new highs in the S&P 500 today means that you believe “this time is different”. It could turn out that way yet history shows that sort of thinking to be very dangerous to your financial well being.

Latest comments

Its a question of "when", not "if". Bear could hit SPX this week, next month, or next year.
I agree, most of the people are convinced the market is overbought. Is the market going to correct- YES, when is the market going to correct? Difficult to tell
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.