Companies of the S&P 500 Index see no recession in the offing, according to FactSet, reflecting an improvement in the U.S. economy and corporate earnings.
Every quarter, during the earnings reporting season, FactSet’s Document Search tool sifts through earnings transcripts and conference calls searching for words and phrases that reveal the sentiment of the nation’s largest publicly traded corporations about the state and the direction of the economy.
This reading is well below the five-year average of 74 and the 10-year average of 61, reflecting an 87 percent decline from the first quarter, when the term “recession” was cited on 124 earnings calls.
Industry-wise, the financial and industrial sectors have the highest number of earnings calls citing “recession,” with five each. In terms of percentage, the real estate, financial, and industrial sectors lead, at 10 percent, 7 percent, and 7 percent, respectively.
The drop in the term recession between the first and the second quarter reflects the improvement in several metrics that point to a resilient economy rather than a contracting economy heading into a recession.
In a broad sense, a recession is a decline in several economic metrics, in addition to GDP, such as a significant decline in employment, real income, retail sales, and corporate earnings.
Neither definition indicates an impending recession at this point.
The economy’s resilience helped improve the earnings scorecard for the second quarter.
The blended annual earnings growth rate for the S&P 500 is 11.8 percent, marking the third consecutive quarter of double-digit earnings growth for the index.
“By the second quarter, a +3.0 percent GDP plot twist, double-digit S&P 500 earnings growth, and easier financial conditions made ‘recession’ the word‑that‑must‑not‑be‑named—mentions fell 87 percent—while tariffs and AI stole the mic leading to better prints, looser conditions, and a new villain,” Michael Ashley Schulman, partner and chief investment officer of Running Point Capital Advisors, told The Epoch Times. “CEOs are managing margins, not apocalypse.”
In addition, Schulman believes corporate leaders may have decided that it’s bad for businesses to talk about the recession bogeyman.
“The mood has shifted from outright fear to a collective, almost superstitious optimism, as if the CEOs are all wearing a lucky shirt to their calls,” he said.
“Frankly, it’s not that the economic clouds have completely parted; it’s that companies are tired of running for cover every time the wind blows (and analysts and investors are tired of hearing about it).
“It’s a classic case of asymmetric risk where there is little upside for a CEO to oppose the administration’s economic narrative vocally, but there could be potential downside in the form of regulatory scrutiny, adverse policy shifts, or negative public attention that could impact their brand.”
Rich Jacoby, CEO at GoldenCrest Metals, sees a disconnect between headline risk over the presumed impact of tariffs and economic reality.
“Yes, tariff actions have always been a headline risk this year, but they haven’t derailed the second quarter as of yet. Companies are talking a lot about tariffs as a cost-margin topic—they are everywhere on Q2 calls—but it’s in no way a recessionary indicator as demand is not collapsing as some had feared in Q1,” he told The Epoch Times.