AET - Only One Sector Has Experienced A True Earnings Recovery
We’ve written before about how the “earnings recovery” in U.S. equity markets is an illusion. Accounting earnings may have rebounded from 2015 lows, but economic earnings–which reverse accounting distortions and account for the weighted average cost of capital (WACC)–remain in a persistent downturn. Figure 1 shows this trend across the U.S. equity market.[1]
Figure 1: Economic vs. GAAP Earnings
Sources: New Constructs, LLC and company filings.
This disconnect between accounting earnings and economic earnings is not just due to a handful of companies. 6 out of 11 sectors currently have