If it is one thing that this bear market has delivered, it is superlatives. Indicator after indicator, metric after metric has gone off the charts and rendered any historical comparison useless. Earnings data seems to be the latest of these.
Earning season is mostly over and although historically the market weakens during this time, we seem to have evaded any serious repercussions (at least so far).
The magnitude of the economic collapse, as shown in the aggregated earnings of the S&P 500 Index is frightening. The chart below, from Chart of the Day, shows 12-month, as-reported S&P 500 earnings. With almost all earnings reports in, over the past 20 months, this has fallen over 90%.
Keep in mind that this is showing real (or inflation adjusted) earnings. If current estimates are confirmed, towards the end of the year, we may see the first 12 month period with negative S&P 500 earnings!
While this is alarming, keep in mind that the market looks ahead while earnings are in the rear-view mirror. I tried to confirm the above chart by using Prof. Shiller’s data but the latest earnings data he shows is for December 2008. Using that as a starting point and going back 20 months, earnings are down 82% - which would lend credence to the 90% collapse.
But the chart doesn’t go back to the 1920’s to show whether the earnings collapse compares in a meaningful way to that era. So I used Shiller’s data once again to do that, here is how earnings looked back then (mouse over for details):
Although there was a dramatic decline from the high in late 1916 and once again a high in 1929, there was no 20 month period which can compare to the recent data. What we saw was an utter and complete collapse of earnings, the likes of which we’ve never seen.
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