Stocks Can Rally Even as Earnings Deteriorate, Leuthold Says

Concerns about depressed corporate profits bringing down the stock market may be misplaced if history is a guide, according to The Leuthold Group.

There’s been only one major episode in data back to 1950 where earnings recovered before the stock market did, Leuthold’s James Paulsen wrote in a note Thursday, and that was the aftermath of the dot-com crash in 2002. In every other case, stocks started to rise before earnings, and in some instances even gained when the earnings were deteriorating at a rapid pace, he said.