Tags: Earnings | Recession | US | Stocks

UBS Strategist Golub: 'Earnings Recession' Might Hurt US Stocks

Wednesday, 05 Sep 2012 02:05 PM

Lower second-quarter profit has paved the way for an “earnings recession” that will hurt stocks, according to Jonathan Golub, chief U.S. equity strategist at UBS AG.

Earnings at the Standard & Poor’s 500 Index’s non-financial companies fell in the second quarter and may drop again in the third. The result would be the first back-to-back declines since 2009, according to data that Golub presented Tuesday in a report.

“It’s very hard for the market to move forward when earnings aren’t progressing,” the New York-based strategist wrote in an e-mail.

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Golub reaffirmed his estimate that the S&P 500 will finish the year at 1,375, or 2.1 percent below Tuesday’s close. His projection is lower than the average reading of 1,396 among 14 strategists in a Bloomberg survey.

At the same time, he reduced his S&P 500 earnings estimate for this year by $1, to $102.50 a share, and lowered his projection for next year by $3, to $107. The revised figures still surpass the survey’s averages of $101.24 and $106.23, respectively.

The profit backdrop suggests any moves by the Federal Reserve to promote economic growth “will likely provide only a short-lived boost to the market,” he wrote.

Fed Chairman Ben Bernanke defended the central bank’s unconventional monetary policies and signaled they might be used again soon when he spoke last week in Jackson Hole, Wyoming.

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