S&P 500 Earnings Update: Forecasts proceed to worsen


John Kevin

Impressive growth in both the US stock and bond markets and the international equity markets this week. This will be covered in another post as this update will focus on S&P 500 earnings. However, the (fast) S&P 500 as of 11/11/22 was down -15.13% YTD while Barclays Agg lost drop by -13.85%, leaving the balanced portfolio 60% / 40% down by -14.62%, a full improvement of 5.5% from the rate of return of -20.11% as of 09/30/22.

S&P 500 data:

The 4-quarter estimate (FFQE) fell to $ 225.20 from $ 226.72 last week, down 0.67%, the smallest sequential decline in the past 3 weeks. S&P 500 S&P 500 profitability fell to 5.64% from 6.01% last week. Q3 22 bottom-up estimate fell to $ 55.90 compared to $ 55.97 last week, still above $ 55

Rate of change:

The pace of change


Expand this spreadsheet and then explore the three years from 2022 to 2024: the 2023 EPS estimate is degrading faster than 2022, although the ’52-week rate of change’ in 2022 for the first time this week was negative. (This was also discussed last week.)

Sector Updates: 2022 and 2023:

Sector Updates: 2022 and 2023:


Four sectors are expected to show faster growth rates for the ENP in 2023 (compared to 2022), in line with today’s forecasts: consumer, basic, financial, utilities.

Take it with a bit of skepticism.

Summary / Conclusion: The third quarter of 2022, the S&P 500 earnings season unofficially ends this week with a Walmart report on Tuesday morning. The S&P 500 EPS estimate for the fourth quarter of ’22 is falling, but it is no surprise if you are reading this blog, since 2023. It is also weakening.

An interesting discussion is the relationship between the changes in the EPS S&P 500 forward forecasts and the yield on 10-year government bonds. There is no doubt that a less restrictive Fed policy will help to soften the lead in the bond market, but it will also help the S&P 500. Four separate 75bp increases in the federal funds rate in 2022 and yet the worst fall in the S&P 500 index since the beginning of the week in terms of end calculations. of the week took place on September 30, 22, when the S&P 500 index fell by 23.93 from the beginning of the week.

If you had asked me in January 22 what the YTD return in the S&P 500 would be after four 75bp increases in the Fed funds rate, I would speculate or guess that it would be much worse than a 23% – 24% cumulative decline.

Add to that the tremendous strength of the dollar this year, and the S&P 500 and the stock market in general absorbed quite a bit in 2022, yet it has held up quite well (in my opinion).

That blog post from last week was prophetic, but it’s not really a boast, and last week’s blog post was not a prophecy either. CNBC is loaded daily with various forecasts for many different stocks and asset classes, and it’s almost a comedy of errors. Assess “risk versus reward” and be patient. International and non-US asset classes are particularly attractive, given the 10- and 15-year annual returns. Clients are still long with Oakmark International Fund (OAKIX) and EMXC or emerging markets ex-China ETFs. Using the American Funds Growth Fund of America as a stock growth indicator, the fund rose 5% last week.

Personally, I had my fortieth post-college meeting last weekend, in 1980 – in a money and banking class taught by a Cincinnati Federal Reserve official – the federal funds rate hit 20% for Paul. Volcker and the 30-year-old Treasury sold up to 15%. Watching the 10-year government bond yield hit 53 basis points at the end of July 2020, just weeks before the Jackson Hole economic conference began, was really like watching your life go full circle.

The general opinion is that the S&P 500 may have another leg shorter as the results of the S&P 500 continue to deteriorate. There is no doubt that the outlook for the future is under pressure. I will not argue with this view or assumption, but will just say that there has been cumulative damage done from the compression of the P / E ratio, so the shift could reverse if bond market pressures weaken in terms of consistently higher returns and could be seen longer period of P / E expansion, as in the early 90’s.

It will be hard (they say) whether the lower EPS outlook can be offset by more stable long-term yields.

Anyway, take everything here with a grain of salt and a lot of skepticism. That’s one opinion. Past performance is not a guarantee of future performance and nothing here may be updated or updated. Capital markets can change quickly, for the better and for the worse.

Thank you for reading.

Original post

Editor’s Note: The summary bullets for this article are selected by the editors of Seeking Alpha.

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