Earnings season is upon us — here's what to expect

div > div.group > p:first-child"> Quraterly earnings for the S&P 500 are expected to decline for the first time since the second quarter of 2016, even though the index is just 2% from its historic high.

Stocks are rising even with lower earnings because of the focus on the future, not the past. The stock market is a discounting mechanism for a future stream of earnings. Flat or declining earnings don't necessarily mean the stock market is in trouble. First, there is a good chance earnings for the first quarter will turn positive. Because guidance is usually conservative, most companies end up beating analyst estimates. On average, the earnings surprise for the S&P 500 is about 3 percentage points.

And that's the key: What side of the recession debate are you on? If you believe there will be a recession in 2020, then earnings will certainly decline and go negative, along with the stock market.As earnings recessions go, this one is pretty modest so far. It looks more like flat earnings growth after a torrential two-year run. Second-quarter earnings are also looking flattish to slightly down.

"You have pricing pressure and cost increases," he said."You have some degree of labor increases, transportation costs, and material costs, as well as some impact from tariffs. You are also definitely seeing pricing pressure, particularly in technology, where there has been pressure on semiconductor prices and even Apple's phones."

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