Income: take this out, put this in. Earnings expectations for the second half of the year are lower but remain in the mid-single digits, but continue to have wide dispersion from winners to losers. Energy is continuing to grow strongly, some consumer discretionary and industrial sectors are growing, and income from media services is significantly lower (Meta is a big deal) and Finance (JPMorgan Chase, Wells Fargo will likely report lower earnings). Ann Larson at Bernstein notes that you can get a very different view of income if you include or exclude certain sectors. S&P 500 earnings: 3rd quarter estimate S&P 500: up 4.7% Old energy: down 2.2% Financial money: up 8.3% Source: Bernstein Conclusion: Overall estimate for the third quarter was in the range of 8% a month ago, and is now in the 5% range. Nick Raich at The Earnings Scout noted. “EPS growth will decelerate but it is never predicted to be negative. How can there be a real recession when corporate earnings growth is never negative,” he said in a note. for customers. With the overall market currently trading at a relatively expensive more than 18 times forward earnings, Raich noted that the stock is currently pricing in a near-perfect environment. “As equities rise, we are increasingly concerned that the market is too optimistic the Fed will be able to make a soft economic landing when fighting inflation,” he said. Problem: The market’s normal relationship with earnings has reversed. Rising earnings are often associated with bull markets and vice versa. At the start of the year, however, the stock fell on the back of increased EPS estimates. Now, stocks are rising as EPS estimates fall. “This confuses many people when they conclude that income doesn’t matter,” says Raich. However, they would be wrong,” Raich said, noting that markets are betting the worst of the EPS estimate cut will end soon.
