"US Profit Growth Has Never Been This Weak Outside Of A Recession"

Tyler Durden's picture

On Sunday, in addition to numerous charts we have shown previously we used the latest Ray Dalio "in defense of risk parity" letter, we showed "what does Fed know that we don't", which was a simple one-word answer: recession. Specifically, Dalio looked at the performance of the All Weather fund which is highly correlated with 6 month forward world growth...

... and concluded that the recent weak performance would suggest global growth six months from now will be running nearly 2% below its already reduced potential. In other words a global economic contraction, something Citi recently made its base case for 2016.

However, while we have been chronicling the US economy's slide into contraction for the better part of the past year mostly on the back of the collapse in the US energy sector, what is odd is that the Fed only now admitted that not all is well in the land of central planning.

In fact, as SocGen's Andrew Lapthorne writes this morning, "that the US Federal Reserve is only now declaring itself worried about global economic growth is perhaps the only real surprise of last week. After all, global earnings momentum (the ratio of analyst upgrades to estimate changes) has plummeted from a respectable 47% in May this year to a recessionary 32% last week. Even once the weak Energy sector is excluded, global EPS momentum has still dropped to 35%, also from around 47% in May."

But while in our previous post on this topic we focused extensively on what the economy itself is signalling, here is another reminder that the real life blood of the US economy, corporate earnings, are about as bad as they were... in 2009. In fact as SocGen confirms,  "US profits growth has never been this weak outside of a recession."

From SocGen:

The chart below shows the annual change in 12-month forward S&P 500 EPS expectations. This series is based on forward consensus expectations and therefore excludes many of the write-downs and exceptional items that are currently pushing down actual reported profits. It is more akin to operational profits and has never been this negative outside of a recession!

And with this latest chart, in addition to the ones we showed previously, everyone should know exactly the same as what the Fed does, which however isn't saying much. Because what the Fed knows and what the Fed does, are two entirely unrelated things, with any Fed "action" quite simply a function of what Goldman Sachs tells the Fed to do.

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bnbdnb's picture

We really have some smart people to plan the world for us.

BandGap's picture

Hey, those dips get bigger every time out!

Hmmm, the next one looks to be a doozy.

KnuckleDragger-X's picture

The bill on those stock buybacks will come due at a bad time and TBTF will take on a whole new meaning.......

Jtrillian's picture

There's going to be a whole lot of companies going under (or restructuring) when the next recession hits.  Sears and JC Penny are on that list.  Anyone struggling right now will soon see the writing on the wall. 

Kinda sad to think so many companies will likely fold.  But that's what happens when banksters are in control.  Until we hold the banksters accountable for their crimes and restore the middle class, it will only get worse. 

StackShinyStuff's picture

Well, not SINCE LEHMAN anyway...

XAU XAG's picture



Never One Roach's picture

Profits may be "weak" but banker bonuses have never been higher!



It's Barry's "Robust Recovery!"

BandGap's picture

And it's not about the Fed. /sarc


The propaganda grows stronger. "Not my fault."

Dr. Engali's picture

I saw that earlier and I about spit coffee all over my screen.

BandGap's picture

Move to the kool-aid, it's much smoother.

Buckaroo Banzai's picture

It tastes great too, but be careful though, it really sneaks up on you.

hangemhigh77's picture

Hey, the guys wearing a suit he must be telling the truth.

Trips Trading's picture

Fundamentals don't matter for the short term. Short term, you can make money trading the S&P500 based on technicals, works just fine for me (10% net return per month, for the last 14 months in a row). 


Wave 2 up now, retest 1990-2000, after that Lower Lows. 


Dr. Engali's picture

Simple, just changed the accounting rules to fix this issue. See, problem..., solution. That's what I'm here for boys and girls.

KnuckleDragger-X's picture

Accounting rules? What accounting rules? You must mean the book "1001 way to skin a sheep"......

ejmoosa's picture

Have I not been saying that for the last 4 quarters here at Zerohedge?  

We have been in a profits recession since the first quarter of 2014.

Here's the question-if GDP is at the level it is at, and the bottom lines are shrinking, where is the difference going?

Federal Tax receipts continue to set records, that's where.

So we are working harder to keep less and giving the Feds even more dollars to waste.

J Jason Djfmam's picture

Just exactly what parameters determine that this is not a recession other than certain individuals unwillingness

to accept the fact that we are/have been in a recession/depression for some long time.

ejmoosa's picture

More or less it's two consecutive quarters of shrinking GDP, which is virtually impossible considering that the government now makes up so much of the spending within the GDP.  

Not to mention the triple seaslon adjustments, which will be used as necessary to keep the meme afloat.


The economy is getting stronger.

Rodders75's picture

For once I have less conviction in writing BTFD

Monetas's picture
Monetas (not verified) Sep 21, 2015 8:55 AM

Profit growth weak .... on the bright side .... tax growth healthy ..... impediments to prosperity and the enjoyment thereof .... parabolic ?

withglee's picture


"US Profit Growth Has Never Been This Weak Outside Of A Recession"

With a properly managed MOE process, growth is never an issue.It's not even an initiative.

With our currently mismanaged MOE process, weak growth is easily rectified: INFLATE.

Since they've been inflating for some time now with QEs (formerly known as monetization), any deficiency you see in the numbers is easily resolved by simply changing the numbers. They're all fake anyway.


Grandad Grumps's picture

Real profits mean nothing. Real return on investment means nothing. All that means anything is adjusted earnings ... as defined by those who get paid the bonuses and stock grants.

It is a corrupt environment. When lying does not work, lie louder and longer.

venturen's picture

wait till you have to make a profit borrowing money above ZERO INTEREST.