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Are we in an Earnings Recession?

Sheraz Mian

Estimates for the Finance sector have come down, as JPMorgan (JPM), Wells Fargo (WFC) and the other banks start coming out with quarterly results from October 15th. Driving this negative revisions trend has been the persistent pressures on banks’ margins, a function of the Fed’s accommodative monetary policy. Other businesses like investment banking and trading have been less than robust as well.

One favorable aspect to Finance’s underwhelming expectations is that it wouldn’t take much to come out with positive surprises, which could serve as a much needed catalyst for these stocks.

Beyond Finance, earnings growth in Q3 is expected to be in negative territory, with the first earnings decline since 2016 at -5.1%. This is keeping the ‘earnings recession’ narrative alive. We don’t think describing this year’s growth challenge as an ‘earnings recession’ is fair, since it primarily reflects tough comparisons. The chart below shows the annual earnings growth picture for the S&P 500 index.

For more details about the Q3 earnings season and the evolving picture for the current and coming quarters, check out our weekly Earnings Trends report.

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