Investment analysts from the Warren Buffet school of investing often say that corporate earnings are “the Mother’s Milk of stock markets.” If true, the babies must be getting fat and healthy.
In the 2008 crash, corporate earnings for the S&P 500 dropped a staggering 92%. But, take a look at this chart:
Corporate earnings have rebounded just as sharply as they fell. In a mere 34 months, corporate earnings have recovered to a level that took 67 years to to reach. We are almost back to pre-crash levels!
This supports my belief that the U.S. economy is recovering. Every quarter, analysts predict the rate of growth has got to slow, as we approach pre-crash levels of earnings and resume a normal growth rate. Yet, a whopping 75% of earnings reports so far have beat lowered expectations.
Now, if we could just fix Europe . . . please!