Leading Indicators And Recession Risk

As of January 25th, the S&P 500 was up 6.3% year to date. Many S&P 500 2019 targets have already been surpassed in the first 3 weeks of the year. That’s while earnings estimates have cratered, and many economic reports have been delayed because of the government. We’ve already missed out on 2 durable goods orders reports. The government shutdown ended after 35 days. However, if there’s no agreement, the shutdown will resume on February 15th. That’s close to the March 1st deadline for a trade deal with China. It’s safe to say political uncertainty is high.

Even though the government is open again, some reports by agencies affected by the shutdown will be delayed. In the previous 13 day shutdown, when reports that skipped a month were published, 2 months of data was released at once. On the data release schedule, the BEA stated,

“The Bureau of Economic Analysis’ schedule of economic news releases has been affected by the partial government shutdown. We will then work with the Office of Management and Budget to publish a revised schedule of BEA’s economic releases. Watch bea.gov and our Twitter feed, @BEA_News, for updates.”

The table below shows the economic report backlog along with previous results and forecasted results.

Earnings Guidance Weakens Further

In the week of January 28th, 124 firms will be reporting earnings. The first 112 firms to report have had a sequential decline in EPS and sales growth as well as weak guidance which has pushed earnings estimates lower. As you can see from the chart below, Q4 EPS growth has fallen from 24.03% to 17.83% and sales growth has fallen from 7.16% to 6.03%. All periods are for the first 112 firms.

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