Do Industry Analysts Anticipate Recessions?

One of our accounts in Luxembourg requested that we determine how well industry analysts’ earnings estimates anticipate recessions. The recent weakness in the S&P 500’s forward P/E has been partly offset by the continued rise of consensus earnings estimates to record highs. Some of these increases probably reflect steady profit margins as companies pass their rising costs through to their selling prices.

It’s widely recognized that the risks of a recession are rising. Yet there’s no sign that industry analysts’ estimates are reflecting that concern. In fact, the data show that analysts don’t anticipate recessions. They chop their estimates only when a recession becomes widely recognized. They are, however, very good at predicting earnings when the economy is growing. Here are a few more insights from the charts below: