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With Wall Street analysts anticipating a possible earnings recession in 2019, Goldman Sachs' economic research team estimates that this could, but is unlikely to, lead to an actual recession.

Why it matters: The forecast 10% decline in profits lowers GDP growth by 0.6 percentage points, Goldman's analysts note, and if earnings growth were to slow to 15 percentage points it could knock a full 1% off of first quarter GDP, now projected to slow from 2018's pace.

But, but, but: Analysts listed 4 key reasons not to expect a recession this year:

  1. Historical correlation between earnings and economic recessions is not very tight — 13 of the 22 S&P 500 earnings recessions were not followed by a recession within 2 years.
  2. Lower corporate tax rates contributed nearly half of the roughly 20% growth in S&P 500 earnings in 2018. Much of the profit slowdown reflects the well-anticipated fading of this one-off factor, with minimal growth effects.
  3. The Fed's U-turn on raising rates has unwound much of the financial conditions tightening seen in the fourth quarter.
  4. The impact of higher labor costs will be offset in part by cheaper oil. Faster wage growth statistically raises capex growth as firms substitute capital for labor. Cheaper oil and higher wages should also support consumption.

"Weaker profit growth is likely to weigh somewhat further on economic activity but does not indicate an impending economic recession," Jan Hatzius, and Goldman's research team said in a note to clients.

Go deeper

Dan Primack, author of Pro Rata
20 mins ago - Economy & Business

The Leon Black clock strikes midnight

Illustration: Sarah Grillo/Axios

Leon Black is "retiring" as CEO of Apollo Global Management, the alternative investment giant he has led since co-founding it in 1990. But he is not making a full break, as Black will remain chair of Apollo's board of directors.

Why it matters: This is the culmination of 18 months of head-in-the-sand obfuscation of Black's dealings with Jeffrey Epstein.

Reddit traders look to pummel Wall Street's old guard

Illustration: Sarah Grillo/Axios

Reddit traders are taking on Wall Street pros at their own game with this basic mantra: Stocks will always go up.

Why it matters: Their trades — egged on in Reddit threads — have played a role in historic market activity in recent days.

The week the Trump show ended

Data: NewsWhip; Chart: Andrew Witherspoon/Axios

Donald Trump was eclipsed in media attention last week by President Biden for the first time since Trump took office, according to viewership data on the internet, on social media and on cable news.

Why it matters: After Trump crowded out nearly every other news figure and topic for five years, momentum of the new administration took hold last week and the former president retreated, partly by choice and partly by being forced off the big platforms.