Earnings growth was anemic in Q1 and not much improvement is expected in Q2 either, with total earnings for the S&P 500 index expected to be negative territory. The trend of modestly negative growth is expected to continue through the September quarter as well, with positive growth returning in the last quarter of the year.

The chart below shows earnings and revenue growth expectations for 2019 Q2 relative to what was actually achieved in the preceding four quarters and expectations for the coming three periods.

As you can see here, earnings growth is expected to be negative for three of this year’s four quarters, which would qualify as an earnings recession. But we should keep in mind that these modest declines are primarily because of the very tough comparisons to last year when growth was boosted by the tax cuts. Growth is expected to resume next year, with full-year 2020 earnings growth expected to be in excess of +10% following the almost ‘flat’ reading for 2019.

The economic outlook still remains favorable, particularly for the U.S. economy, though the trade issue has become a recurring theme in the earnings releases. The big banks that dominate the Q2 results at this stage appear to be experiencing the indirect effects of the trade uncertainty. JPMorgan (JPM Quick QuoteJPM - Free Report) and Citigroup (C ) explained the tepid growth in their business lending trends by citing the effects of the trade uncertainty on corporate spending trends. We had heard something similar from FedEx (FDX Quick QuoteFDX - Free Report) earlier when it reported its May quarter results, which we count as part of the Q2 tally.

All in all, the trade issue is expected to feature across the board this earnings season.

For a detailed look at the Q2 earnings season and expectation for the coming periods, please check our weekly Earnings Trends report here >>> Previewing the Q2 Earnings Season