The Bank of America economics team on Thursday declared "The US recession is here," noting Q2 will be "brutal" with a 12 percent quarter-on-quarter seasonally adjusted annual rate drop, the biggest decline post-WWII, after growth of only 0.5 percent in Q1. However, while the firm sees a severe decline, they expect it to be a fairly short one, with a return to growth in Q3 and a full year contraction of 0.8 percent.
The firm expects about 3.5 million jobs to be lost and even more hours to be cut, especially among leisure, hospitality and retail workers but a "targeted and aggressive policy response" could help counter the disruption to economic activity and ensure a sound financial system. Given this recessionary call, BofA's head of US equity and quantitative strategy, Savita Subramanian, slashed the firm's 2020 EPS view from $169 to $138, implying a 15% year-over-year decline. Subramanian notes their forecast is slightly below the decline for EPS recessions that usually accompanies an economic recession, which is slightly over 20%. Of the 15 EPS recessions since 1935, the firm said economic recessions occurred during 11 of them, or about 75% of the time.
Of the 13 economic recessions tracked, there were 11 instances of EPS recessions, or about 85% of the time.