The last few quarters have seen corporations really struggle when it came to bringing home the bacon as earnings and revenues have slipped to the point that they show significant negative trends. Trends that are expected to continue in the first quarter despite the magic of Pro Forma, one off items and various other accounting sleight of hand tricks used to put lipstick on the Pig. FactSet Research figures that 1st quarter earnings will come in 8.5% lower than a year ago and will mark a 4th consecutive quarter of falling earnings on a year ago basis if the estimate holds up, and most likely it will. Revenues are expected to fall 1.1% in the first quarter and will mark a 5th consecutive decline if so. On a historical basis revenue and earnings declines like this are usually associated with severe market corrections and significant economic dislocation as seen during the Great Depression and the 2008-2009 financial crisis. Instead the Standard and Poors 500 Index began the year with a near record plunge only to finish the quarter about even with a near record comeback. You better have a strong stomach if you’re buying stocks in this environment because something has to give.
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