S&P 500: The 'short but sharp' recession will not minimize the overall impact on corporate profits – JP Morgan

The 1Q20 earnings season will provide an important first look at how the ongoing pause in global activity is impacting corporate earnings and what investors should expect over the remainder of the year, per JP Morgan Asset Management.

Key quotes

“We expect 1Q20 S&P 500 operating earnings to be down -14.6% from a year prior.”

“S&P’s expects 2020 operating earnings per share to come in at a level of $146.57, representing a -6.7% contraction from a year prior. This stands in contrast to pro forma estimates, which suggest 2020 earnings will decline -11.9% in 2020 to a level of $146.57. We are less optimistic, and believe earnings will contract -20% this year; in our opinion, consensus has some catching up to do.”

“We continue to advocate for a focus on quality with a dash of cyclicality. This means embracing sectors like health care, technology and consumer staples, and taking advantage of underweights in highly-levered sectors like energy and REITs to maintain benchmark exposure to sectors like financials.”