Earnings unlikely to escape a slowdown unscathed

Sources: Bloomberg and Wells Fargo Investment Institute, as of December 31, 2023. Analysis uses the monthly S&P 500 index trailing 12-month earnings per share (EPS) measured from peak training EPS during official recession dates to trough that occurred within 12 months of recession end. The S&P 500 Index is a market-capitalization-weighted index considered representative of the U.S. stock market. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Investing in stocks involves risk and their returns and risk levels can vary depending on prevailing market and economic conditions. Recession dates are as follows: August 1957 to April 1958, April 1960 to February 1961, December 1969 to November 1970, November 1973 to March 1975, January 1980 to July 1980, July 1981 to November 1982, July 1990 to March 1991, March 2001 to November 2001, December 2007 to June 2009, and February 2020 to April 2020.

Key Takeaways

  • We expect slowing revenue growth and higher costs to squeeze profit margins in the coming quarters, likely leading to a continued earnings decline.
  • Overall, we expect corporate earnings to continue to roll over as economic growth slows.