United States already in a recession? Yes, the Wall Street feels so

An economic recession in the US soon? Well, the Wall Street believes that recession has already arrived.

US corporate earnings are experiencing what might become the worst prolonged drop in the last seven years. This comes at a time when the US economy teeters on the verge of disaster as the stalemate over hiking the debt limit continues. As the first quarter earnings season winds down, analysts predict that S&P500 company profits fell 3.7 percent year-over-year.

Data provided by Bloomberg reveals that 78 percent of companies beat projections.But that is less spectacular than it seems because analysts lowered their expectations before the season began.

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Importantly, it was corporate America's second consecutive quarter of fall in profit. The S&P500 index has posted no gains since major Wall Street lenders kicked off the earnings season in mid-April. Bloomberg Intelligence predicts a further 7.3 percent drop in profit in April–June.

Analysts have further downgraded their estimates. They now expect higher rates and waning consumer demand to hurt profitability beyond the third quarter of this year. This shows a lengthier profit recession than during the Covid-19 pandemic.

During 2015–2016, when the US Federal Reserve launched its previous rate hike cycle, profits fell for more than three quarters.

(With agency inputs)