September 08, 2019

Given our forecast of an inflation rate below the 2% target range and a 1.75% real GDP growth rate, it should not be surprising that the LJE forecasting model projects a flat year-over-year real change in operating earnings. As the slowdown of the economic expansion materializes, we expect a deceleration in the earnings growth and a deterioration of the year over year comparison. Our model estimates the odds of an earnings decline during 2020 to be approximately 1 in 2. The same estimation process puts the odds of a real earnings growth in the 5% range at 1 in 2 and the likelihood of the increase being better than 10% is estimated to be 1 in 10. These estimates point to tight and flat earnings forecast.

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