Earnings may be falling short of Wall Street's expectations, but data show the S&P 500 has produced above-average performance in quarters with earnings growth rates similar to what we're seeing now.
by MARK HULBERT
In the fourth quarter of 2021, the S&P 500’s earnings per share are estimated to have been 60.5% higher than in the comparable quarter of 2020.
The 60.5% year-over-year increase is calculated on the basis of the two-thirds of S&P 500 companies that have reported and S&P estimates for the remaining third.)
In contrast, for the first quarter of 2022 — the current quarter, in other words — the comparable year-over-year growth rate is estimated by S&P to be 10.4%. (See chart.)
And since Wall Street analysts are often too optimistic, it’s entirely possible that the final number will be even lower.
Too-fast earnings growth rates indicate an overheated economy that will, in turn, force the Federal Reserve to raise interest rates. From this perspective, a more subdued growth rate is less likely to force the Fed’s hand, and therefore more likely to be sustainable.
Regardless, the point of this walk down memory lane is that a declining earnings growth rate is not, in and of itself, a reason to give up on the stock market.
Source: TheStreet, Inc.
https://www.thestreet.com/investing/ear ... ood%2BNews
