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Earnings Outlook: Risk of an earnings recession rises, as S&P 500 profits to fall for first time in 3 years

Investors should start bracing themselves for an earnings recession, with first-quarter numbers for the S&P 500 expected to suffer the first decline in nearly three years, as macroeconomic headwinds continue to pull down analyst estimates.

Although some say low investor expectations and the stabilization of the macro outlook suggest the recent stock market rally can continue toward fresh highs, others are worried that macro uncertainties and risks to the earnings outlook for the rest of the year have yet to be fully appreciated.

RBC Capital’s Head of U.S. Equity Strategy Lori Calvasina said that based on early reports, earnings sentiment appeared to bottom in January, while Stifel Nicolaus strategist Barry Bannister said it was “too soon” to call an earnings recovery as consensus expectations for the year are still falling.

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