This year looks increasingly likely to be the third in the past four years in which the UK stock market’s aggregate earnings have fallen. Further evidence, in case anyone needed it, that we are in an extraordinary economic environment.
As far as the UK is concerned, there is a commodity-related element to the declines, with the UK stock market’s preponderance of oil and mining companies leading to a much more volatile series of earnings data in recent years than elsewhere. Nevertheless, although earnings may not have experienced outright declines in the US, they have not met initial expectations and earnings have been disappointing in most other parts of the world too.
The chart below suggests that consensus growth forecasts have been consistently too optimistic for a long time.