Monday, 13 June 2016

US recession risk increased but stock earnings also expected to go higher

Economists think the probability of a US recession has increased. From the Wall Street Journal:

Many economists believe the U.S. faces a non-negligible risk of entering a recession within the next year. Asked to rank the probability of being in recession at some point over the next 12 months, respondents to The Wall Street Journal’s monthly survey of economists, on average, put the odds at 21%. That’s about double what they were a year ago. Not high enough to panic, but high enough to pay attention.

There is a silver lining for stocks though: profits may be set to grow again. From the Wall Street Journal:

... [E]arnings for S&P 500 companies are pegged to decline by 3.5% in the second quarter from a year earlier, according to Thomson Reuters, after falling 5% in the first.

But this expected decline is for pro forma figures... Under generally accepted accounting principles, or GAAP, earnings will likely be much higher than they were a year earlier.

No comments:

Post a Comment