ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Noisy Earnings Meet Recession Fears
News
Share

Noisy Earnings Meet Recession Fears

Stoyan BojinovFeb 24, 2016
2016-02-24

The bulls are still fighting for control as evidenced by persistent profit-taking pressures and price volatility.

Noisy corporate quarterly results and mounting recession risk fears aren’t exactly helping to restore investors’ confidence either.

Quarterly Season Results Are Lackluster

This earnings season has proven to be a mixed bag; big surprises to the upside in some areas matched with sharp declines in others. Consider the chart below and the latest weekly insights (as of February 19, 2016) from the authority on earnings data, FactSet:


Content continues below advertisement

S&P500 price vs. forward EPS

Key takeaways from this chart:

  • EPS growth continues to trade sideways.
  • In hindsight, stagnating EPS growth (blue line) in the past appears to have been a solid predictor of more recent price volatility (dotted green).

Other data points and insights include:

  • Of the 87% of the S&P 500 companies that have reported quarterly results thus far, 68% have beaten analyst earnings estimates.
  • Currently, the blended earnings figure for the S&P 500 is showing a year-over-year decline of 3.6%; with energy companies excluded, the earnings growth figure jumps to a positive 2.5%.
  • S&P 500 companies that generate more than 50% of their sales inside the U.S are posting blended earnings growth of 2.7%; companies that generate less than 50% of sales inside the U.S. are posting an earnings decline of -11.2%.

Perhaps most notably, according to FactSet: If the S&P 500 reports a decline in earnings for the quarter, it will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009.

Recession Risks Priced in…or Not

The other clouds of uncertainty looming over Wall Street are the mounting fears that a recession will hit. Experts and media talking heads of all stripes have undeniably talked up rising risks of a recession in recent weeks.

The bears are saying that:

  • The recession has already started, as evidenced by falling stock and commodity prices.
  • China and emerging-market weakness will be a bigger drag on growth than expected.
  • Central bankers are “running out of bullets.”

The bulls contest that:

  • Key economic indicators with reliable track records are not flashing recessionary warning signs.
  • The U.S. economy can still grow modestly, despite global weakness.
  • The market is pricing in a recession when there is only modest growth in sight.

Do your own research and be sure to consider the sources’ agenda before their opinion. With that said, respected blogger Jeff Miller points out, “In sharp contrast, the best sources see recession odds of 10% or lower.”

S&P 500 ETF Chart Still Broken

Consider a four-month daily chart for (SPY A), courtesy of BarChart:

spy 4 month daily chart

The key technical takeaway regarding the state of the market is this:

  • The recent rebound, albeit encouraging, remains constrained in a directionless range; since the February 11 lows, SPY has rallied higher on very weak volume, which generally (although not always) does not coincide with major bottoms

Much to the bull’s frustration, there is still no clear trend at hand.

The Bottom Line

The market remains choppy and the fundamentals are deceiving in many ways. For short-term traders, “risk off” plays will likely come into favor once again. For investors, now appears to be an opportune time to consider scaling into ex-energy bargains with minimal global exposure amid rising, although likely overblown, recession fears. With that being said – bottom pickers swim at your own risk.

Follow me @SBojinov

» Popular Pages

  • Tickers
  • Articles

Jun 02

A Cash Alternatives ETF With a Distribution Yield Over 6%

Jun 02

Treasury Yields Snapshot: June 2

Jun 02

Main Management Market Note: June 2, 2023

Jun 02

China’s EV Market Recovers, Keep an Eye on KARS

Jun 02

A Debt Limit Deal Is Made, Target Treasuries of Any Duration

Jun 02

This Week in ETFs: Only 2 Launches, Many Closures

Jun 02

As Summer Nears, Eye Travel Stocks in JRNY

Jun 02

NYSE’s ETF Leaders: Northern Trust’s Michael Natale

Jun 02

Seize Market Gains & Optimize Dividends With KVLE

Jun 02

VettaFi Voices: Active or Passive for ESG ETFs?

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

JEPI

JPMorgan Equity Premium...

VTI

Vanguard Total Stock Market...

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

TLT

iShares 20+ Year Treasury...

BND

Vanguard Total Bond Market...

XLP

Consumer Staples Select...

BOTZ

Global X Robotics &...


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X