https://chatgpt.com/share/e/67f5c0b2-d5fc-800c-9a23-87a0e8bbb518
The average decline in S&P 500 earnings during U.S. recessions varies depending on the severity of the recession. However, based on historical data from post-World War II recessions, here are the key takeaways:
📉 Average Decline in S&P 500 Earnings During Recessions
General Historical Range
- Average decline: 20% to 30%
- Median decline: ~21%
- Based on data from 12 U.S. recessions since World War II, earnings have typically dropped by around 20–25%, though this can vary significantly.
Notable Examples
| Recession |
EPS Decline (Approx.) |
Notes |
| 1973–1975 |
-15% |
Oil crisis-driven |
| 1980 & 1981–82 |
-18% |
Double-dip recession |
| 1990–91 |
-18% |
Relatively mild |
| 2001 (Dot-com bust) |
-32% |
Tech-heavy earnings hit |
| 2008–09 (Great Recession) |
-57% |
Severe financial crisis |
| 2020 (COVID crash) |
-22% |
Sharp but short |
📊 Deeper Context
- Earnings declines typically lag the start of a recession, since profits may not fall until revenues drop and companies fail to cut costs quickly.
- The Great Financial Crisis (2008) is an outlier with an over 50% drop in earnings, which skews long-term averages upward.
- Excluding 2008, the average is closer to 23%.
🧠 Implications for Investors
- Earnings estimates are usually revised downward during recessions, sometimes drastically.
- The market tends to bottom before earnings do, anticipating recovery.