Tags: Edwards | earnings | data | recession

SocGen Strategist Albert Edwards Says Earnings Data Back His Recession Call

By    |   Thursday, 12 December 2013 07:45 AM

Societe Generale equity strategist Albert Edwards says his recent prediction that the U.S. economy is headed for recession has generated "hoots of derision," MarketWatch reports.

But recent earnings data prove his point, Edwards says in a commentary obtained by the news service.

If the economy is swimming ahead nicely, "how come Thomson Reuters has just reported the fastest pace of U.S. earnings downgrades on record?" he said.

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The Thomson Reuters statistics show that companies in the Standard & Poor's 500 Index have offered negative guidance 103 times, compared to only nine examples of positive guidance. MarketWatch didn't cite a timeframe.

That 11.4 to 1 ratio favoring negative guidance is the biggest negative ratio on record. The second place figure — a negative 6.8 ratio — came in the first quarter 2001, when the economy was entering recession.

In addition, Thomson Reuters says analysts have lowered their fourth-quarter earnings forecast to a gain of 7.8 percent from 10.9 per at the beginning of the quarter

"If, as we suggested, the margin cycle is turning down, profit forecasts over the next few weeks will be eviscerated. To me, this is consistent with recession."

Others, however, say economic growth is increasing. Pimco predicts GDP will expand 2.25 to 2.75 percent next year from 1.8 percent this year.

"The U.S. economy is healing," Pimco CEO Mohamed El-Erian told Bloomberg. "Household balance sheets are in a better place."

He was encouraged by the 203,000 gain in payrolls last month and the drop in unemployment to 7 percent. "The breadth of improvement was notable," El-Erian said.

Editor’s Note: See Pastor Explain His Biblical Money Code for Investing

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Societe Generale equity strategist Albert Edwards says his recent prediction that the U.S. economy is headed for recession has generated hoots of derision, MarketWatch reports.
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2013-45-12
Thursday, 12 December 2013 07:45 AM
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