US economy bounced back and after two straight quarters of degrowth witnessed a recovery in GDP in the third quarter. What it did was push back the talk of a recession anytime soon, at least not in 2022 or early 2023. Are the companies also making fewer mentions of ‘recession’ is something that can give stock market investors an idea about the way forward?
FactSet used Document Search to look for the word ‘recession’ in all of the S&P 500 companies’ earnings conference call transcripts from September 15 through November 16. In their third-quarter earnings calls, 179 of these companies mentioned the word ‘recession’, which is much more than the 5-year average of 63 and the 10-year average of 54. This is actually the third-highest number of S&P 500 firms to mention “recession” on their earnings calls going back at least to 2010 with roughly 6% of those companies still having to report actual third-quarter results (using current index constituents going back in time).
The Financials (34) and Industrials (32) sectors have the most companies that mentioned “recession” during earnings calls for the third quarter. On the other side, the percentage of businesses that mentioned “recession” on their Q3 results calls during this time was highest in the Real Estate (65%), Materials (57%), and Financials (54%) sectors.
However, during their results calls for the second quarter, 242 S&P 500 companies mentioned the word “recession” (from June 15 through September 14). Since at least 2010, this is the most instances of S&P 500 firms using the word “recession” in their earnings calls (again using current index constituents going back in time).
So, the number of S&P 500 companies using the word “recession” on earnings calls for the third quarter (179) compared to the second quarter has decreased by 26% quarter over quarter (242). Although the total number of firms citing “recession” for the third quarter will probably surpass 179 (6% of the index has yet to declare actual results for the third quarter), it won’t surpass the level of 242 for the second quarter.