Chart of the Day: S&P 500 Earnings Beats Hit 15-Year Low – What is the Future Outlook?

CNBC – Gone are the days when companies could just count on post-pandemic pent-up demand to drive results. Some industries are still benefiting from that, including airlines, hotels, casinos, credit card companies, and some restaurants. And as companies seek ways to preserve margins and offset demand issues, price hikes are still an option, at least for companies focused on the core consumer basket.

Big brands have seen earnings propelled by double-digit price hikes – even if it has had a negative impact on demand elasticity. Just look at some of the companies that have raised prices but have seen volumes fall in the latest quarter:

  • ConAgra: Prices up 17%, volumes down 8%
  • Kraft Heinz: Prices up 15%, volumes down 5%
  • Clorox: Prices up 14%, volumes down 10%
  • Colgate-Palmolive: Prices up 13%, volumes down 4%
  • Coca-Cola: Prices up 12%, volumes down 1%
  • Procter & Gamble: Prices up 10%, volumes down 6%

The outlook is getting more cautious from consumer bellwethers. Both Walmart and Home Depot warned that they expect a tougher year ahead. And that caution arrived amid what’s turning out to be the weakest earnings performance for S&P 500 companies since Q3 2020, with earnings falling 2.8% year-over-year so far this season.

Below is a chart of recent quarterly S&P500 earning growth that is sinking, though many analysts believe in Q1 2023, the earning picture may begrudgingly improve. Will they be right?

Morgan Stanley Managing Director Kathy Entwistle and Strategic Wealth Partners CEO Mark Tepper discussed S&P500 earnings expectations and future market expectations. Kathy Entwistle says consumers “don’t realize” they are paying more than they should for stocks. Mark Tepper shockingly admits that GAP Earnings (removal of one-time charges) are down YoY 23%. See this conversation in the video below.

These poor earnings estimates have caused a strategist at Morgan Stanley to predict that stock indexes would drop as much as 26% at some point in the coming weeks and months, as Bloomberg reported.

Then there is the issue of Price Earnings (PE) ratios. The recent move in higher rates means that the earnings yields of the S&P 500 should rise as well – or effectively lower the PE ratio. This would suggest that the S&P500 earnings would equate to 15.4 to 16 – it currently is well over 20. These newly adjusted PE ratios would value the S&P 500 at roughly 3,550 – learn more here.

But of course, none of the above earnings adjustments account for any “Black Swan” event that could cause a decline of 20 to 80% earnings crash as happened during the Covid pandemic and in 2008. What if a “Black Swan” event occurred, causing even a moderate crash of 50% in earnings?

With the S&P500 index currently trading around 4000, n the chart below, we can see how far the index could fall in the coming months. Furthermore, what if any earnings expectations are not brief but rather systemic with a longer-term fundamental change in the economy?

Notice that the S&P500 largely trades in line with earnings expectations – except for extremely brief situations. What could be “Black Swan” events on the horizon depends on your view of the world. A Ukrainian war that spins out of control, China deglobalization policies coming from the West over Taiwan, large-scale terrorist attacks, or even a natural catastrophic event. But perhaps this is “pessimism porn.”

The more likely event in any of the cases is that the Fed will soon pivot (reverse QT to QE and drop interest rates) and bail out Wall Street as they have done so many times before. In that event, the stock market goes to new highs, with a new round of hyperinflation.

What could go wrong?

Right Wire Report
Right Wire Reporthttps://rightwirereport.com/
Right Wire Report was a group of concerned citizens who took action to promote traditional values and work for a better America.

Columns

A Simple Question

What is a woman? Anyone with an IQ above room temperature can answer the question. Everyone, that is, except Democrats.

Democrats Tesla Takedown is a Proven Astro Turf Movement

Elon Musk and other journalistic leaders like Joe Rogan have been asking the critical question, “Who is behind the organization of these Tesla protests?”

Can Ramaphosa and Trump Come to Terms?

Whether South Africa can quell the hostility emanating from Washington, without compromising on its national priorities, is a formidable test for a country

Maddened Europe

Viable prospects for peaceful settlement of conflict between Moscow and Kyiv exist, but Europe obsesses over threat of incursion onto European territory.

BOMBSHELL: DOGE Proves Democrats Guilty of Election Fraud!

As the old expression goes, “That didn’t take long!” Over...

News

Crawford Defeats Musk-Backed Rival to Preserve Liberal Majority on Wisconsin Supreme Court

Judge Susan Crawford, backed by in-state Democrats and supported by millions in out-of-state donations, won most expensive Supreme Court seat in state history.

Victory! Federal Court Orders Parental Notice Laws Restored to Protect Minors Seeking Abortion, in a case almost 40 years in the making.

Teaming up with public officials, the Bopp Law Firm and Nevada Right to Life, PJI took a stand in federal court to restore protections for young girls, the preborn and parents.

Trump Says Agency Heads Will Work With DOGE After Elon Musk Leaves

President Donald Trump said adviser Elon Musk will eventually have to depart from the DOGE and go back to running his companies.

FTC Chairman Raises Concerns Over Sale of 23andMe DNA Data

FTC said it was worried about the safety of the personal data of Americans who were previously customers of genetic testing company 23andMe.

Judge Dismisses COVID Lawsuit Against Former New York Gov. Cuomo

Judge dismissed class-action lawsuit against former Gov. Andrew Cuomo that blamed his admin for COVID-19 deaths in nursing homes across NY.

Tesla Firebombing Suspect Hit With Federal Charges

The U.S. Dept of Justice has filed federal charges against a suspect in connection with a firebombing attack on a Tesla dealership in Loveland, Colorado.

What to Expect From Trump’s Global Tariffs

Trump has dubbed April 2 “Liberation Day,” when he will unveil reciprocal tariffs to level the trading field between the United States and its 200 partners.

Voters Head to Polls in 3 Key Elections in Florida, Wisconsin: What to Watch For

On April 1, voters head to the polls for three races in Florida and Wisconsin, with substantial implications for the future beyond the current contests.
spot_img

Related Articles

Popular Categories

MAGA Business Central