The outlook for small business earnings has been contracting since 2019, retreating below the pandemic bottom in August, with no turnaround yet.
The glaring outperformance of S&P 500 operating earnings (in light blue below) above small business earnings since 2023 (dark blue below since 1986) looks unsustainable even as a bullish consensus forecast continued divergence over the next 12 months (red line).
Historically, the earnings of S&P 500 companies have correlated with trends in more economically sensitive smaller companies as the economy slows and the money supply contracts.
See more in August Sees Dip in Small Business Optimism With Credit Uncertainty.
Meanwhile, commodity prices confirm the downturn in global demand, with the Bloomberg Commodity Index (below since 2020) now down 32% from the 2022 high and falling.
Treasury yields have also been falling (prices rising) as the yield curve un-inverts in another reliable signal of incoming recession.
;
