S&P 500 Earnings Continue Their Collapse
Earnings Drive Stock Prices Long Term
Over the past decade S&P 500 earnings growth has averaged about 8.5% (source: Bloomberg).
S&P 500 earnings grew 5.1% in 2022 (source: Factset Earnings Insight 12/16/2022).
S&P 500 earnings are flatlining for 2023 (see below).
Inflation chips away at corporate earnings, in my opinion this is what is happening here and this trend will likely continue into 2024 – possibly resulting in negative earnings.
Negative earnings hurt stock prices.
source: Factset Earnings Insight, Current Year 2023 S&P 500 earnings
Earnings estimates for Q1 2024 continue to fall, while Wall Street drives up the price of a narrow set of stocks.
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DEFINITIONS
EPS – Earnings per share (EPS) is a figure describing a public company’s profit per outstanding share of stock, calculated on a quarterly or annual basis. EPS is arrived at by taking a company’s quarterly or annual net income and dividing by the number of its shares of stock outstanding.
Factset – FactSet provides financial information and analytical applications to global buy and sell-side professionals, including portfolio managers, market research and performance analysts, risk managers, sell-side equity researchers, investment bankers, and fixed income professionals. FactSet's software platform, also called FactSet, includes real-time news and quotes, company and portfolio analysis, multi-company comparisons, industry analysis, company screening, portfolio optimization and simulation, predictive risk measurements, alpha testing and tools to value and analyze fixed income securities and portfolios.
S&P 500 Index - The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90. The index is a capitalization weighted index of the 500 large companies listed on various stock exchanges (such as the NYSE or NASDAQ). The S&P 500 was developed and continues to be maintained by S&P Dow Jones Indices, a joint venture majority-owned by S&P Global. The S&P 500 differs from the Dow Jones Industrial Average and the NASDAQ Composite index, because of its diverse constituency and weighting methodology. It is one of the most followed equity indices, and many consider it one of the best representations of the U.S. stock market.
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