The earnings recession is worse than it looks on the surface. While GAAP earnings are down 1% over the trailing 12 months, core earnings are down 6%. The difference is earnings distortion, which just hit levels not seen since the last two market crashes. However, as is always the case, investors should not throw the baby out with the bathwater. There are sectors that are more profitable than they appear because earnings distortion is much lower or negative.
The Consumer Non-Cyclicals sector has the least earnings distortion. In fact, earnings distortion levels are negative