The Recession Has Officially Hit in Fantasyland – Uh Oh!

This recession is horrible isn’t, it? First quarter growth pacing at 2.8%, only 75% of companies have topped earnings, 2019 earnings estimates rising. The S&P 500 is less than 1% off its all-time high.

  • It is the recession that keeps on giving. The recession that is surely not coming 2019 –well maybe in fantasyland.

Earnings Are Stronger Than Expected

Earnings for the week continue to be better than expected with 75.3% of the 77 companies in the S&P 500 topping estimates, according to data from S&P Dow Jones Indexes. The average since the second quarter of 2012 is 69.7%, with a standard deviation of 4.36%. It makes the current results to this point better than the norm.

eps beats

(Data for S&P Dow Jones)

Additionally, the number of companies that have missed estimates is at 16.9%, versus an average of 21.2% and a standard deviation of 3.2%.

(Data for S&P Dow Jones)

Estimates Tick Higher

The better than expected results to this point has led to a minor uptick in 2019 earnings estimates. Estimates for 2019 increased to $165.02 per share from $164.99 per share last week.

eps est.

(Data for S&P Dow Jones)

Still Undervalued

It leaves the S&P 500 still trading around 15.6 times 2020 earnings estimates and well below the historical average of about 17 to 18 times one-year forward earnings.

GDPNow

More good news —GDPNow ticked up to 2.8% for the first quarter this past week. The strong GDPNow reading from the Atlanta Fed was a result of the better than expected retail sales in March, which came in at 1.6% versus estimates for 0.8%.  Leading indicators came in at 0.4% versus estimates of 0.03%.

I don’t know if this what a recession is like than what was everyone freaking about it?

Have a great weekend

-Mike

This article first appeared on Mott Capital.

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