S&P 500 Earnings (Inflation-Adjusted)

jamesmith

With first-quarter earnings season well underway (over 65% of S&P 500 corporations have reported), today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% from its Q3 2007 peak to Q1 2009 low which brought inflation-adjusted earnings to near Great Depression lows. Since its Q1 2009 low, S&P 500 earnings have surged (up an inflation-adjusted 1120%) and currently come in at a level that is well above its dot-com bubble peak and fast approaching its credit bubble peak. It is interesting to note that the original run up in real earnings from Great Depression lows to dot-com highs took over 67 years. The current spike has taken 34 months. In the end, if corporate earnings were to continue to beat expectations (of those that reported so far this quarter, a relatively high 70% have beat expectations), then inflation-adjusted S&P 500 earnings could make new, all-time record highs this year -- a dramatic reversal from three short years ago.

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