After the worst month of a new year since 2009 and an earnings recession, economic growth could support the equities market and stock exchange traded funds ahead.
Dragging on U.S. stocks, fourth quarter earnings results have been lackluster.
“We’re seeing an earnings recession. And 75 percent of the time earnings recessions have preceded or accompanied economic recessions,” S&P Capital IQ’s Sam Stovall told CNBC.
In January, analysts lowered earnings estimates for S&P 500 companies for the quarter, John Butters, senior earnings analyst at FactSet, said in a note. The Q1 bottom-up earnings per share estimate, an aggregation of estimates or all companies in the index, dipped by 4.7%. To put this in perspective, the average decline in the bottom-up EPS estimate over the first month of a quarter has been 3.3% for the past four quarters. During the past five years, the average dip in the bottom-up EPS estimate during the first month of a quarter has been 1.9%.
However, Stovall is holding on to that 25% possibility that the economy can maintain growth ahead.