S&P 500 Earnings: Biggest Decline on Record

Lest the recent rally set you too complacently in your profit-counting chair, consider the following reminder from the kind folks at Chart of the Day:

Today's chart helps provide some perspective as to the magnitude of the current economic decline. Today's chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 80% over the past 18 months, making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a level not seen since the 1930s and 40s -- the back end of the Great Depression. While earnings have been struggling since Q3 2007, it was the latest quarter (Q4 2008 the first full quarter following the financial meltdown), where the real damage was done. During Q4 2008, the S&P 500 came in with its first negative earnings quarter ever and the amount lost during the quarter was more than the index has ever earned during a single quarter.

Here's the chart:

Comments

[investor88:]

Good research to enlighten those who think we are on roll what with even Citi saying it is making record profits, BAC paying back TARP. Caveat emptor.

Mar 22 09:03 AM

[Michael Hoeft:]

I think the Yen will explode like crazy in the coming weeks.

Mar 22 09:15 AM

[Rob Viglione:]

Why will the Yen explode and what does that have to do with S&P 500 earnings?


On Mar 22 09:15 AM Michael Hoeft wrote:

> I think the Yen will explode like crazy in the coming weeks.

Mar 22 02:54 PM

[Rob Viglione:]

This is the perfect data to help equity investors baseline expectations. After all, stock investment is predicated on buying earnings streams. With earnings already having dropped 80% and still falling, valuations should reflect:

1) Decreased earnings per share (EPS)
2) Contracted valuation ratios (P/E)
3) Additional risk premium since earnings are still in free-fall

Mar 22 02:56 PM

[joes:]

Earnings have declined 80% overall, with much of that being recognized in financial, energy and commodity prices. The companies that were innovating, IT, healthcare, material sciences have been doing OK, especially considering the chaos emanating from Wall Street.

Once we round up the latest crooks things will be fine, the financial apocalypse is no more here that the rapture.

Mar 22 05:42 PM

[ChipSeal:]

"I think the Yen will explode like crazy in the coming weeks."

While the hyperinflation model seems to fit the present situation, dollar bear are failing to realize that today, while the dollar is in terrible shape, it is the least terrible currency around.

Mar 23 09:09 AM

[AndrewBaker:]

No-one seems to want to take notice of reality: if we all buy stocks and push the prices up as a result, then surely that will end this recession, so some appear to be thinking. Crazy: stocks are valued according to what the company in question is expected to return in growth and/or income in the future, and that includes earnings (and dividends where applicable). When stocks are bought at prices which ignore reduced earnings (and reduced or cancelled dividends), then a loss is certain. Holding them for 20 years and then saying "I didn't make a loss," is fine (and not likely to be true, for obvious reasons to most), but stocks are traded more frequently than that, and very soon buyers prepared to pay above true value prices will soon run out - as in any good Ponzi scheme - and that means: this market will drop right back because it is now overvalued.

Glad I've got that off my chest.

Mar 23 02:39 PM

[MikeX:]

Earnings picture is worse today:

www.tradingstocks.net/...

(bottom of the page)

Yet the stock market is 50% higher :-)

Sep 22 10:01 AM