| 20 November 2009
The good news? Earnings are improving. The bad news? They are improving from an awful level, especially when adjusted for inflation. The key question from a valuation standpoint is: Will earnings recover enough to justify the markets current price? As we can see they have a long way to go. From Chart of the Day:
With a large majority of third-quarter earnings in the books (87% of S&P 500 companies have reported for Q3 2009), today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% from its Q3 2007 peak to its Q3 2009 trough, which makes it easily the largest decline on record (the data goes back to 1936). On the positive side, S&P 500 earnings bottomed and are moving up sharply.
