It is the reason that investors should proceed with caution when relying on forward earnings to determine stock valuations. Not very long ago, at the start of the New Year, corporate earnings were forecasted to increase on a year-over-year basis by more than 20% in 2015. But only a few weeks later, this robust earnings outlook has not only completely evaporated, but projections are now for earnings growth to turn negative starting in the second quarter. And given the fact that these earnings forecasts continue to shrink further with each passing week, it is likely that the actual results may end up much worse than where the already significantly downward revised forecasts stand today. If history is any guide, this developing and deteriorating outlook for corporate earnings bodes ill for the stock market in the months ahead.
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