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People are worried about the trade war. We can see some of the effect of this worry on the negative movement of forecast earnings per share (EPS) growth which is charted above. Some drift south on these numbers is normal, but we saw an acceleration of this movement in August.

The consensus analyst forecast for year-over-year (YoY) EPS growth for the S&P 500 in Quarter 3 of 2019 stands at –3.6% right now. If EPS growth is indeed negative for Q3, which starts official reporting in late October, then it would be the first time since Q4 2015—Q2 2016 that there have been three successive quarters of negative YoY quarterly EPS declines. We discussed at that time that we were going through a earnings recession, and we could be in the middle of another one right now. However, earnings recessions do not mean that we necessarily are going to get an economic recession where the actual gross domestic product (GDP) of our country contracts.

One item to note is that firms got quite a boost last year in EPS when the corporate tax cuts first took hold. This makes for very difficult year-over-year comparisons this quarter as companies have fully adjusted to the new reality of being able to keep more of their profits.


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