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The second quarter of 2019 showed earnings declined by 0.4% in the second quarter of 2019 for all companies in the S&P 500 index, which just happens to be the same exact rate of decline observed in Q1. In both cases, the earnings decline ended up being better than the pessimistic expectations analysts had going into the quarter.

That isn’t the only coincidence to show up in the earnings numbers. We have also seen the same exact growth rate in the first two quarters of 2018: both grew by 25%. This isn’t just a curiosity (although it definitely is that), but it also highlights the importance of understanding the idea of “comparables”.

To illustrate this idea, let’s imagine a new worker at an investment bank, Jane, who is hired at a $100,000 salary in her first year. She earns that six-digit income in her first year, and does so well that she is given a 20% raise in Year 2, where she is now earning $120,000. While her performance in Year 2 is equally good, the bank informs her that lower profits mean that she will not be getting a raise in Year 3.

Should Jane be angry? On the one hand, her income growth rate in Year 3 was 0% on a year-over-year basis. On the other hand, a 20% raise is a tough act to follow. On a CAGR basis, Jane has earned raises of 9.5% across her tenure, which is over triple inflation and far better than what one would expect in most jobs.

This demonstrates that your interpretation of the numbers really depends on how you look at things, but also looking at things the wrong way will result in very different conclusions: either Jane is treated extremely well or Jane is being treated unfairly. The difference between these interpretations hinges on the different values of the CAGR and the annualized returns, but most importantly, it demands an awareness of how looking at different time periods creates different interpretations.

This brings us back to the concept of “comparables”. When looking at growth of just about anything finance-related, whether it’s stock prices, company profits, or an individual’s salary, volatility is expected: the numbers will not go up at the same rate every year (and in many cases, numbers will go down). What is crucial, then, is to be aware of how growth rates vary for different periods, and to note when a growth rate falls dramatically due to tough comparables. In Jane’s case, her unsustainable 20% annual growth fell to a still high and impressive 9.5% growth rate, and just focusing on the 0% growth rate in Year 2 would ignore this crucial bit of information.

This sounds simple, but it is often ignored, particularly in the financial press. Scary headlines about 2 quarters of earnings declines ignore the fact that 2019 is anniversarying a period of extremely high growth rates. After 25% growth, the S&P 500 is actually showing a 2-year CAGR of 9.4% following 1H19’s 0.4% contraction. That’s a very high growth rate—far higher than most 2-year periods in the S&P 500’s history.

Of course, the analysis doesn’t end there. A good analyst will start doing 3-year, 5-year, and so on analyses to start to capture whether the tough comparables of 2019 is a one-off or if there is a significant slowdown that is indicative of a structural threat to the economy and to stocks.