Stock Market Briefing: Stocks As Recession Indicator June 29, 2018 Dr. Edward Yardeni 516-972-7683 eyardeni@ Debbie Johnson 80-66-1333 djohnson@ Mali Quintana 80-66-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents Stocks As Recession Indicator 1-3 June 29, 2018 / Stock Market Briefing: Stocks As Recession Indicator www.
3602 3002 202 1802 1202 Figure 1. S&P 500 & RECESSIONS (ratio scale) Stocks As Recession Indicator Jun 3602 3002 202 1802 1202 602 602 2 1933 1929 1925 1921 2017 2013 2009 2005 2001 1997 1993 1989 1985 1981 1977 1973 1969 1965 1961 1957 1953 199 195 191 1937 2025 2021 2 Source: Standard & Poor s. 360 300 20 180 120 Figure 2. T PT PT P T PT PT PT PT PT PT PT P T PTP T PT PT P T S&P 500 BULL & BEAR MARKETS (ratio scale) Jun 360 300 20 180 120 60 1933 1929 1925 1921 2017 2013 2009 2005 2001 1997 1993 1989 1985 1981 1977 1973 1969 1965 1961 1957 1953 199 195 191 1937 2025 2021 60 Note: Shaded green areas denote S&P 500 bull markets, while red areas are bear market declines of 20% or more. Business cycle peak (P) & trough (T), Source: Standard & Poor s. Page 1 / June 29, 2018 / Stock Market Briefing: Stocks As Recession Indicator www.
2 185 160 135 Figure 3. Stocks As Recession Indicator S&P 500 FORWARD EARNINGS & REVENUES PER SHARE (ratio scale) 6/21 2 185 160 135 1 1 85 85 60 60 35 35 Forward Earnings* (168.6) Forward Revenues* Divided by (136.) 7% Growth Rate** 79 80 81 82 83 8 85 86 87 88 89 90 91 92 93 9 95 96 97 98 99 00 01 02 03 0 05 06 07 08 09 11 12 13 1 15 16 17 18 19 20 * Time-weighted average of consensus estimates for current and next year. Monthly through April 199, then weekly. ** Compounded monthly to yield 7% annually. Source: Thomson Reuters I/B/E/S. 30 25 20 15 Figure. CORPORATE AFTER-TAX PROFITS REPORTED TO IRS* (billion dollars, saar, ratio scale) 30 25 20 15 5 5 8 50 52 5 56 58 60 62 6 66 68 70 72 7 76 78 80 82 8 86 88 90 92 9 96 98 00 02 0 06 08 12 1 16 18 20 * Excluding IVA & CCAdj. Source: Bureau of Economic Analysis. Page 2 / June 29, 2018 / Stock Market Briefing: Stocks As Recession Indicator www.
12 Figure 5. Stocks As Recession Indicator CORPORATE PROFITS MARGIN IN GDP* (after-tax profits as a percent of nominal GDP) 12 8 8 6 6 2 7 9 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 2 * Using after-tax corporate profits reported to IRS. Excluding IVA & CCadj. Source: Bureau of Economic Analysis. 75 Figure 6. AFTER-TAX CORPORATE PROFIT MARGIN & COSTS 12 Compensation of Employees Plus Private Fixed Investment (as a percent of nominal GDP) 70 8 6 65 Corporate Profits After Tax* (as a percent of nominal GDP) 60 8 50 52 5 56 58 60 62 6 66 68 70 72 7 76 78 80 82 8 86 88 90 92 9 96 98 00 02 0 06 08 12 1 16 18 20 22 2 * After-tax profits as reported to IRS (without IVA and CCAdj). Source: Bureau of Economic Analysis. Page 3 / June 29, 2018 / Stock Market Briefing: Stocks As Recession Indicator www.
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