We now forecast S&P 500 EPS of $110 in 2020, a decline of 33% from 2019. On a quarterly basis, this reflects year/year growth of -15%, -123%, -21% and +27% (Exhibit 1).
We have cut our 2020 earnings forecast three times in 30 days (-37% in total) as the magnitude of the economic slowdown has become increasingly apparent. Our economists have incorporated similar expectations into their revised annual average US GDP growth forecast of -4% in 2020, including –24% annualized growth in 2Q. At the sector level, we expect large declines in Energy, Consumer Discretionary (e.g., Cruises, Hotels, Restaurants), and Industrials (e.g., Airlines). On the other hand, stockpiling may partially insulate Consumer Staples EPS.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
