STIMULUS MAY BE NEEDED TO SAVE U. S. PROFIT CYCLE

Just as what constitutes an economic recession is debated, what qualifies as an earnings recession is also unclear.

The threat of such an event has been discussed at length in the past year, but investors would be wise to pay a little closer attention since the S&P 500 has delivered two consecutive quarters of negative growth.

Dubravko Lakos- Bujas, a U. S. equity strategist at J. P. Morgan, expects the earnings rout will continue for another two quarters at least.

Average earnings growth forecasts for the U. S. equity benchmark currently sit at -5.3 per cent for Q1 2016 and - 0.7 per cent for Q2.

“This suggests that in order to avoid the end of the current corporate profit cycle, we may need a fresh injection of some form of stimulus (weaker U. S. dollar, additional QE, increase in government spending, etc.),” Lakos-Bujas said.

He al s o warned t hat J. P. Morgan’s Quantitative Macro Index is now at a level that has historically been associated with a 64- per- cent chance of a bear market