- Don’t Fear 4Q19 SPX EPS decline; market has already discounted it looking to 2020

- Preliminary U.S.-China trade deal, fading impeachment should ease 2019 headwinds

- Expectations of 10%+ SPX growth should propel markets higher

This time 12 months ago, “earnings recession” fears were in full bloom among U.S. investors.  Well, the recession came but the market ignored it and looked ahead, hence the nearly 30% rise in the Standard & Poor’s 500 index (SPX) in 2019. Indeed, depending on which data provider you use, the 4Q19 EPS season beginning this week will likely mark the third or possibly fourth consecutive quarter of EPS declines for the SPX.

Is that worrisome? Not really. It looks to me that investors are already looking forward to the earnings growth in 2020, when comparisons (to 2019) will be easier.  While the 4Q19 EPS results won’t be great, they are still likely to be better than currently expected. That should bolster already strong market sentiment as we move into 1Q20.

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The stock market is a discounting machine. I believe one of the reasons investors have  ignored 2019’s pedestrian earnings growth—effectively flat on 2018’s $161 per share—was that 2018’s numbers were artificially ...
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