Earnings season unofficially kicks off next week, when the big money-center banks start reporting their results for the third quarter. Expectations are low, with analysts projecting U.S. companies to say profits fell 3% from a year earlier. What’s more important, though, is what companies say about the future, and in that regard, this earnings season could make or break the stock market.

Although analysts have been trimming their 2019 forecasts all year – they took down their third-quarter estimates, for example, from a previous call for a 5.3% gain to the current expected drop –  they have inexplicably kept their 2020 projections largely unchanged, calling for earnings growth of 10% next year. That’s even as a Duke University/CFO Global Business Outlook released last month showed that more than half of U.S. chief financial officers anticipate the economy will be in a recession within a year, with optimism at its weakest point since 2016. “The number of CFOs growing more pessimistic outnumbers those growing more optimistic by a five-to-one margin,” Duke finance professor John Graham, who authored the report, said in a video.

So, do analysts really still believe earnings growth of 10% is achievable? We’ll soon know the answer to that question, because – as the folks at DataTrek research point out – now is the time when companies, investors and analysts start focusing on the year ahead. The unpredictability of the U.S.-China trade war has made it next to impossible for companies to effectively predict where earnings may be the next quarter, let alone in 2020. But as of now, it’s hard to say where earnings growth might come from.

The Institute for Supply Management said last week that its index measuring activity in the manufacturing sector fell to its lowest level since 2009, below even the level that it fell to when earnings growth stalled between late 2014 and mid-2016. Perhaps more troubling, the ISM’s gauge of activity in the services sector, by far the largest part of the economy, tumbled to its lowest since 2016.

For all the bad news on the domestic front, the international picture isn’t any better. This is important because members of the S&P 500 now generate as much of 40% of their revenue outside the U.S. When the OECD last month updated its global gross domestic product forecasts, it cut its 2019 estimate for U.S. growth by 0.3 percentage point to 2%, while slashing its estimate for the Group of 20 economies as a whole by 0.4 percentage point to 3.2%. Its 2.9% estimate for global growth this year would mark the world economy’s worst performance since the global financial crisis.

Where things get interesting is when you compare the earnings outlook for the S&P 500 to those indexes tracking smaller companies that aren’t as exposed to the broader global slowdown as their larger, multinational peers. Morgan Stanley’s chief U.S. equity strategist, Michael Wilson, pointed out in a research note last week that analysts’ forecasts for earnings per share among members of the S&P MidCap 400 over the next 12 months have come down 3.7%, while EPS estimates for members of the Russell 2000 Index have been reduced by 6.3%. The implication is that it’s only a matter of time before the estimates for the S&P 500 members come down, too.

There’s a danger for the stock market in all of this because it seems investors are buying in to analysts’ current optimistic 2020 forecasts. The S&P 500 is trading at 16 times next year’s expected earnings. That’s up from a little over 14 times back in January, when profits were still expected to advance in 2019. It’s also about to turn higher than the average during the 2014-2016 earnings recession.

The lack of earnings growth means that the stock market is increasingly beholden to the Federal Reserve and continued interest-rate cuts to support lofty valuations. Earnings season “seems unlikely to provide the punch necessary to stimulate excitement about the outlook,” Bloomberg Intelligence equity strategists Gina Martin Adams and Michael Casper, wrote in an Oct. 3 research note. “Sadly, it may come down to policy makers to offer risk-tolerance a shot in the arm.” That sums it up about right.

This article provided by Bloomberg News.