Overall, earnings growth has slowed this quarter, but it doesn't appear that it will turn negative. Future guidance hasn't been as bad as many feared.
However, when compared to inflation, earnings growth looks even worse.
"One of the great mysteries to the average investor is how earnings can grow while the economy shrinks. And what they're missing is … GDP prices in real terms, while earnings price in nominal terms," said David Waddell, chief investment strategist at Waddell & Associates in Tennessee.
While a recession is an "inevitability," in Waddell's words, inflation means that a big drop in S&P 500 earnings does not have to happen — which could limit the downside for stocks going forward.
"If you go back to the inflationary times that people like to reference, earnings were pretty good," Waddell added.
