Earnings recessions without a full-blown economic recession are a rarity, but if history is a guide it does not necessarily have to be a negative event for the stock market.
As the outlook for first-quarter growth looks gloomier, traders are concerned about the fact that profits for the quarter are expected to show the first decline since 2009. According to Thomson Reuters, S&P 500 net income is expected to fall by 2.7 percent.
Morgan Stanley Chief U.S. Equity Strategist Adam Parker released a report Monday on past earnings recessions and points out there have only been three since 1974 where net income declines were not associated with an economic recession. Each time, the S&P improved in the year prior to the decline, and also rose from the beginning to the end of each of the three periods.