CHART OF THE DAY: A Stock Market Trend Has Developed That Coincided With The Last 3 Recessions

In a new report, ECRI's Lakshman Achuthan reiterates his thesis that the U.S. economy is in a recession.

Among his many points was this one about how consecutive quarters of negative earnings growth coincide with recessions. From his report:

This is a bar chart of S&P 500 operating earnings growth going back a quarter of a century on a consistent basis, as we understand from S&P. Others can choose their own definitions of operating earnings, but this is the data from S&P. In this chart, the height of the red bar indicates the number of consecutive quarters of negative earnings growth.

It is interesting that, historically, there have never been two or more quarters of negative earnings growth outside of a recessionary context. On this chart, showing the complete history of the data, the only times we see two or more quarters of negative growth are in 1990-91, 2000-01, 2007-09 and, incidentally, in 2012. This data is not susceptible to the kind of revisions one sees with government data. The point is that this type of earnings recession is not surprising when nominal GDP growth falls below 3.7%. So, even though the level of corporate profits is high, this evidence is also consistent with recession.

In short, earnings recessions seem to coincide with economic recessions.