Excerpt from Bloomberg quoting DataTrek co-founder Nick Colas:
… “First, consider the outlook for earnings. Signs are emerging that the US is headed toward an economic contraction, and corporate profits typically shrink about 25% during a recession, according to DataTrek Research co-founder Nicholas Colas. Analysts are nowhere near baking that into their earnings outlooks. In fact, data compiled by Bloomberg show adjusted earnings per share are still projected to grow 10.4% in 2022 to $227.40 a share and an additional 7.5% to $246.30 a share in 2023…
As Colas wrote Friday, even a downturn that’s “milder than most” could bring earnings down about 15% to around $188 a share, and a full-blown recession would look more like $166 a share. Apply a slightly more generous-than-average 18 times earnings multiple to those levels, and you land at an S&P 500 level of about 3,386 for the mild recession scenario and 2,970 for the grimmer one. (The S&P 500 closed Friday at 3,825.33.)”….
Full article here on Bloomberg.