[ad_1]
This weekend’s was an opportunity to indicate readers how a lot income and EPS “anticipated” progress estimates have modified over the past 52 weeks.
If readers would have been proven the entire week-to-week knowledge, you’d see how anticipated progress charges can change over the course of a 12 months for ahead estimates.
Nevertheless, due to the pandemic, sell-side consensus has proven the final 5 quarters that analysts are ready till they’re proper on high of the quarter or seeing the precise prints and administration commentary earlier than boosting their EPS and income estimates.
There isn’t a query that the ahead EPS and income estimates for the S&P 500 are the Road’s greatest guess as to what the following 12–15 months will appear like (and does appear like) from a valuation perspective. Mix that with anticipated “sector” progress charges for EPS and income and we will compile an informed guess as to threat vs reward.
Therefore watching the revisions (even small revisions) to anticipated progress charges could be very useful.
Wanting on the 2022 “anticipated” progress charges for S&P 500 EPS and income notably since August ’21, readers are nonetheless seeing upward revisions.
Beginning with Q3 and This autumn ’21 earnings studies after which 2002, the S&P 500 ought to return to extra “regular” anticipated progress charges for S&P 500 EPS and income as we transfer past the Covid-19 and pandemic years of 2020 and 2021.
S&P 500 knowledge:
- The ahead 4-quarter estimate for S&P 500 earnings rose to $207.06 as of this previous week, versus $206.88 final week. What’s probably extra fascinating for readers is that the ahead estimate was $199.34 on July 2 ’21, and $176.54 on April 2 ’21. That could be a 17% improve for the S&P 500’s ahead estimate simply since April 2, 21.
- The PE ratio on the ahead estimate is now 21.4x versus final week’s 21.8x and the 21.5x print on July 2, 2021.
- The S&P 500 earnings yield was 4.67% this week, versus 4.58% final week.
- The Q3 ’21 bottom-up EPS estimate is now $49.14. Anticipate that estimate to commerce over $50 as soon as Q3 ’21 earnings season begins.
CFRA / Lowry’s and Market Bubble Situations
CFRA Lowry Analysis held a convention name this week, and talked in regards to the market-cap concern for the S&P 500 and what that portends. It’s an ongoing concern since right this moment’s S&P 500 appears quite a bit like late 1999, early 2000, with the tech focus within the S&P 500 and the High 10 market-cap points within the S&P 500 right this moment being 28% of the important thing benchmark.
With out revealing the whole presentation, Lowry made the purpose that market bubbles are accompanied by extraordinarily lengthy breadth divergences (see hyperlink under)
after which with various further slides, concluded that “circumstances per a market bubble stay absent” (see slide under).
Relating to market breadth, which is clearly a key metric when contemplating secular bear market setups, Lowry famous that:
- NYSE “all-issues” Adv- Dec line peaked July 2, whereas the Working Corporations Solely (OCO) Adv-Dec line peaked June 8;
- The Nasdaq Adv-Dec line peaked February 2;
Abstract / conclusion: As many have famous the S&P 500 has been in a “stealth correction” all 12 months. The most recent stat to get some traction is that for the reason that S&P 500 peaked in early September ’21, declining 6 of the final 8 classes, the magnitude of the drop has solely been 2%–3%, which isn’t (but) a giant deal.
The substantial distinction between the tech and High 10 S&P 500 focus right this moment, and 1999, early 2000 is the “high quality of earnings” of which Ed Yardeni has written about repeatedly in the previous couple of years. When “tech” hit 33% of the S&P 500’s market cap in early 2000, the S&P 500 “earnings weight” of that focus was simply 13%.
Immediately, with 27% of the S&P 500 being tech right this moment, the “earnings weight” is much greater, nearer to 22–23%, and whereas Tesla (NASDAQ:) might be the most important weight within the High 10 of the S&P 500 with the most important divergence between market cap weight and “earnings weight”, Tesla is a part of the patron discretionary sector together with Amazon (NASDAQ:).
Personally, I might like to see a 5%–7% correction throughout the S&P 500 between now and October tenth, simply to reset expectations, however I believe Q3 and This autumn ’21 S&P 500 earnings shall be okay and extra importantly the 2022 S&P 500 EPS and income progress fee revisions are nonetheless ticking greater.
Keep in mind too, simply because the circumstances aren’t current for a “market bubble” situation, doesn’t imply the S&P 500 couldn’t see a considerable correction.
This might all change shortly with the tax invoice and tapering (anticipated to start in mid-November ’21) and a complete host of different “unknowns” that would strike unexpectedly.
Take the whole lot you hear and browse in regards to the markets with a grain of salt and a point of skepticism.
[ad_2]