Earnings recession continues, but the consumer is OK

I was one of the first reporters to point out the "earnings recession" in the . As it stands now, we are poised for at least three consecutive quarters of negative earnings growth.

S&P Earnings

Q2 2015: -0.7 percent

Q3 2015: -1.5 percent

Q4 2015 (est.): -5.5 percent

(Source: Factset)

S&P earnings for the fourth quarter would be fractionally positive were it not for the 68 percent decline in energy earnings, which were hit by a perfect storm of a continuing decline in oil prices, contract cancellations, and low natural gas prices caused by the record warm weather in December. Materials were also down 26 percent as global growth slowed commodities imploded.

There are two major problems for big, multinational companies, which are the majority of the S&P 500.

1) The global slowdown. More than 40 percent of the earnings from the S&P 500 occur outside the United States. Technology companies get almost 60 percent of their earnings outside the U.S., according to S&P Capital IQ. Weak emerging markets are particularly difficult for technology and consumer staples companies.

2) The strength of the dollar. Consumer staples, for example, will likely show a small decline in profits in Q4. Much of this is because of unfavorable foreign exchange rates, the same issues that devastated them in the third quarter.

But it's not all negative. The big positive will be the strong U.S. consumer. We should get positive numbers—and commentary—from consumer discretionary, health care, and telecom.

For the year 2015, telecom, health care and consumer discretionary will likely post double-digit earnings gains.

As for 2016, remember at this time last year, analysts were expecting an 8 percent gain in earnings for 2015. That has disappeared—we may have a small decline for 2015, the first full-year decline since 2009.

And guess what analysts are expecting for earnings growth this year? Yep, 8 percent.

Is the market over-valued? No, but it's not cheap. Last year's earnings estimates of $118.11 put the S&P 500 multiple at 16.2. This year's estimates of $126.97 put it at 15.1. That is close to historic norms.

Unfortunately, "not overpriced" may not be good enough. Bears are arguing for a multiple contraction based on the flat earnings, declining revenues, slower global growth, and the Fed raising rates.