“Experts are split on what’s behind this huge 4-year long bull market.
Some believe it has been driven by improving fundamentals. Others believe it has been driven by the Federal Reserve’s easy monetary policy.
In a recent note, BTIG’s Dan Greenhaus noted that the S&P 500 climbed 128 percent during a period when earnings jumped 129 percent.
In other words, he believes there’s a strong case to be made that the market reflects an earnings-driven rally.
But economist David Rosenberg believes that this assessment is faulty.
He takes a page out of Lakshman Achuthan’s book and notes that year-over-year earnings growth has gone negative. From Rosenberg’s Friday research note:
If contraction and recession are synonymous, then an earnings recession is already underway. These talking heads on CNBC are talking about an ‘earnings-driven rally’. I have no clue what they are talking about. My database is from Haver Analytics, who get their numbers from Standard & Poor’s, and the latest update was on March 6th. And at last count, S&P 500 Q4 operating EPS is running at -1.7% on a YoY basis, and at a $23.32 estimate right now for last quarter, it is actually running only moderately above the level prevailing in Q4 2006 ($21.99). So on this basis, earnings have only eked out a mere 0.8% annualized gain over the past seven years.
Rosenberg offers this chart…”
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