Global Perspectives Q&A

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I have received so many questions through my web page that I thought it helpful to share some of them with all advisors. Below are two of the most frequently asked questions:

How Long Do Bear Markets Typically Last?

I read this question as “How long will this 2020 bear market last?” There are no typical bear markets — they tend to be “black swans,” different from anything we ever seen, imagined or prepared for in the past. The coronavirus is our first global pandemic since the Spanish flu in 1918, which lasted around two years and cost 50 million lives. As of March 24, the Johns Hopkins CSSE site reported 396,249 cases of coronavirus and 17,241 deaths worldwide. We don’t have 1,000 P/E tech stocks as we saw in 1999; we don’t have a broken financial system caused by a collapsing real estate market, such as we witnessed leading up to 2008.

What we have today is a draconian, albeit necessary, response to slow the spread of the virus. That response is shutting down large swaths of the global economy, most immediately impacting the global service economy. The good news is the massive and unprecedented policy response by the Federal Reserve and U.S. Treasury, as well as central banks around the globe, to support financial markets. We look forward hopefully to a massive fiscal policy response from Congress by the time this is published. This bear market is the fastest-moving on record; may it also prove to be the shortest-lived on record.

What is U.S. Corporate Earnings Growth for the S&P 500?

U.S. corporate earnings growth for the S&P 500 depends on which quarter you are talking about:

  • Reporting for 4Q19 earnings is essentially complete, with 498 of 500 companies reporting; bottom-line earnings growth is 3.1%, with top-line revenue growth of 5.8%. This is actual earnings growth, not estimates that are subject to revision and often wrong.
  • The first quarter of 2020 ends on March 31 and reporting begins around mid-April. Wall Street analysts’ consensus “estimate” currently is slightly negative at -1.3%. My estimate is that 1Q20 earnings growth will be -10% or worse. Company results will be reported from April through June, so actual 1Q20 earnings growth for the S&P 500 will not be known definitively until near the end of the second quarter.

To ask me a question, please visit my website here. Scroll to the bottom right of the page to find the “Ask a Question” box and click on the “ASK” button to send an email directly to me. Please keep the questions coming and we appreciate all you do in this difficult time.

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