We're heading into "one of the most anticipated recessions of all time"... Or maybe not.

Earnings Estimates Are Way Too High for a Recession By Marc Gerstein, director of research, Chaikin Analytics We're heading into "one of the most anticipated recessions of all time"... Or maybe not. Bloomberg surveyed more than 500 Wall Street strategists to kick off the new year. And the news service concluded that we should expect "fresh pain for investors" in 2023. But not everyone got the memo apparently... As I'll explain today, for the most part, analysts' earnings estimates aren't currently what we would expect in a recession. Many estimates are way too high. And that means if a recession happens this year, things could get ugly for many stocks. Let me explain... Recommended Links: Huge Recommendation @ 10 A.M. ET Today The man who nailed the '20 and '22 crashes will explain why a rare event is coming to stocks this year, and how it could open the biggest money-making opportunity in 20 years. You could have doubled your money 34 times with his picks, so be sure to grab his FREE recommendation for 2023 as soon as it begins. Click here by 10 a.m. Eastern time for details (includes free recommendation). The #1 Gold Play for 2023 Some of the richest men in the world are jumping into gold right now... because evidence suggests we could see MUCH HIGHER prices in the coming weeks. But if you're not taking advantage of a little-known way to invest for around $5 today, you're missing out. Click here for full details. Generally, stock prices reflect future expectations. After all, you buy a stock because of what you expect to happen in the future as you own it. With that in mind, let's assume Bloomberg's forecast of "one of the most anticipated recessions of all time" is correct... That's an expectation about the future. So in turn, we can also assume that stock prices already reflect that outlook today. And as my colleague Karina Kovalcik explained Monday, a recovery period follows a recession in the economic cycle. When that happens, we should expect stock prices to rise. But things are more complicated this time. And it comes down to corporate earnings... You see, earnings don't just fall in a recession. They fall a lot. Here's a long-term picture of annual percentage changes in corporate profits... The gray bars denote all the recessions in the U.S. since the late 1940s. Notice how earnings growth usually goes negative (meaning, earnings fall) during those periods. Also notice that the earnings changes in 2008 and 2009 were much worse than normal. That wasn't a typical recession. It was a once-in-a-generation meltdown of the global financial system. We're expecting a more "normal" kind of recession this time. These types of recessions happen when demand for goods and services drops to correct an "excess" in the system. Today, the excess is about money supply. Too much money chasing available goods and services led to out-of-control inflation in the wake of the COVID-19 pandemic. The nature and causes of excesses change from recession to recession. Their common trait is that the system corrects by slowing down or experiencing reduced demand. Again, this recession will likely be more like normal. So we should pay closer attention to the earnings declines in similar recessions. They suggest a decline in the 15% range. But the thing is... earnings estimates don't align with that expectation today. The following table breaks down expected earnings-per-share ("EPS") reports over the next year. It's split into two categories – all companies and those in the S&P 500 Index. Take a look... Put simply, that kind of growth is not what happens in a recession. It's not even close. The current feelings from analysts are out of line with the "most widely anticipated recession." And that could spell disaster for investors if a recession plays out this year... You see, it means a lot of stocks are still overpriced based on future expectations. And if a recession happens, it will cause a lot of surprises – and pain – for investors... Investors hate earnings shortfalls, reduced estimates, and lower guidance. So if a recession changes analysts' future expectations in the months ahead, many stocks will get crushed. Whether you anticipate a recession or not, now is the time to prepare just in case. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral     Bearish Dow 30 +0.75% 13 16 1 S&P 500 +1.26% 142 291 66 Nasdaq +1.73% 34 49 17 Small Caps +1.24% 549 970 373 Bonds +1.62% Real Estate +3.63% 0 18 13 — According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish.. Major indexes are mixed. *  *  *  * Top Movers Gainers BIO +6.49% ETSY +6.11% SEDG +5.84% AMZN +5.81% ALB +5.65% Losers TFX -7.60% DXCM -4.26% ISRG -4.20% SCHW -2.57% ALL -2.14% *  *  *  * Earnings Report Reporting Today Rating Before Open After Close No earnings reporting today. Earnings Surprises AXNX Axonics, Inc. Q4 $-0.34 Beat by $0.13 KBH KB Home Q4 $2.47 Missed by $-0.38 STNG Scorpio Tankers Inc. Q4 $4.29 Beat by $0.22 *  *  *  * Sector Tracker Sector movement over the last 5 days Discretionary +6.08% Materials +5.09% Information Technology +4.52% Energy +4.44% Communication +4.22% Real Estate +3.77% Industrials +2.71% Financial +2.58% Utilities +1.32% Staples +0.56% Health Care -0.40% *  *  *  * Industry Focus Software & Services 31 110 55 Over the past 6 months, the Software & Services subsector (XSW) has underperformed the S&P 500 by -5.74%. Its Power Bar ratio, which measures future potential, is Weak, with more Bearish than Bullish stocks. It is currently ranked #18 of 21 subsectors and has moved down 1 slot over the past week. Indicative Stocks MSTR MicroStrategy Incorp FIVN Five9, Inc. RBLX Roblox Corporation *  *  *  * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, click here. You're receiving this e-mail at STEVENMAGALLANES520.NIMS@BLOGGER.COM. For questions about your account or to speak with customer service, call +1 (877) 697-6783 (U.S.), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Chaikin Analytics, LLC. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Chaikin Analytics, LLC. 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. www.chaikinanalytics.com. 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