Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 (Index: SPX) at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

Since our last update three months ago, the S&P 500's earnings recession deepened and lengthened again. The bottom dropped to at least $171.52 earnings per share, down from the $183.22 projected during our Fall 2022 snapshot. Looking further forward, to the end of 2023, expectations for the S&P 500's earnings also declined, but by a smaller amount. The S&P 500's earnings at the end of December 2023 are now expected to be $199.28 per share, down from $206.22 per share.

At the same time, Standard and Poor projects the new earnings recession will not recover to its pre-earnings recession level until December 2023. The following chart illustrates how the latest earnings outlook has changed with respect to previous snapshots:

About Earnings Recessions

Depending on who you talk to, an earnings recession has one of two definitions. An earnings recession exists if either earnings decline over at least two consecutive quarters or if there is a year-over-year decline over at least two quarters. The chart identifies the periods in which the quarter-on-quarter decline in earnings definition for an earnings recession is confirmed for both the Pandemic Earnings Recession (December 2020-December 2021) and the new earnings recession (March 2022-December 2022) according to the first definition. The regions of the graph shaded in light-red correspond to the full period in which the S&P 500's earnings per share remained below (or are projected to remain below) its pre-earnings recession levels.

Our next snapshot of the index' expected future earnings will be in three months, where it is quite possible the bottom for the 2022-23 earnings recesion will shift to the first quarter of 2023.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 15 February 2023. Accessed 17 February 2023.

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