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S&P 500 Earnings Estimates for 2023 Rise, It Won’t Happen

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30 comments on S&P 500 Earnings Estimates for 2023 Rise, It Won’t Happen

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Tweets of the Day

Unlearning

Which One Of These Does Not Fit In ?

  1. S&P earnings estimates for 2022(e) have increased from $200.03 to $226.62 and 2023(e) have gone from $246.79 to $248.30. Earnings estimates jump 9.75% vs 2022.
  2. Fed hiking at the fastest pace since the 1980s
  3. CPI up 8.5% from a year ago
  4. 30-year mortgage rate 5.41% vs 3.12% a year ago.
  5. Just in time manufacturing morphs into supply hoarding
  6. War in Ukraine disrupting shipping channels
  7. European energy crunch 
  8. Falling stock market
  9. Demand Destruction
  10. Recession

Earnings Estimates 

I wrote about this a bit yesterday in If You Think I’m Bearish Please Read John Hussman without recalling that earning estimates went up or having seen the Tweets by Bill Gurley.

The hook now is looking at declines and thinking along the lines of “stocks are down 15% so they are cheap.”

Stocks on average will not be cheap if the S&P declines 50% from the top. 

If the S&P declines 70% then we can discuss cheap Both fiscal and monetary policy goosed earnings. That is why Shiller uses CAPE (cyclically-adjusted PE) ratios and Hussman uses MAPE (margin-adjusted PE) ratios.

Earnings mean revert.

Most of the forward earnings are total nonsense. They do not reflect higher inflation, higher interest rates, or trade flows which looking ahead will increase costs. 

The Hook 

Nonsensical earnings estimates, ridiculous forward PEs, and thinking things look cheap following big declines  are all part of the hook. 

This post originated at MishTalk.Com.

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Mike Shedlock

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30 Comments
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thomsoni
thomsoni
3 years ago
Nonsensical Forward Earnings Estimates….Could not agree more. Analysts do a terrible job of predicting future earnings of ANY cyclical company…ie: Predicting the future price or say copper or oil, is really just a wild assed guess. However, there is a smaller subset of the S&P where the analysts CAN do a fairly accurate future prediction…and I am guessing its based on historical trends.
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FromBrussels
FromBrussels
3 years ago
The world gonna be a better place soon; Pelosi, your eldest democratic cu nt, honored puppet Z elensky with a visit to US’ most criminal, most corrupt, nazi infested hell hole, vassal nation! Pelosi is familiar with corruption of course; on a 200K salary she managed to amass a 135 million net worth ! Z elensky though, has been doing much better, almost being a billionaire by now, but then again, he s undeniably a US ‘ war hero of course, he s bound to get even richer, for ALL possible financial and military support has been promised once more, this time by the old cu nt and her equally criminal, yet ever so democratic entourage ! Like I said , don t worry about financial economic setbacks , with diapered a$$holes and dito c$nts like the ones you enjoy, the US and the world in general, gonna be just fine, no doubt about it !
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Zardoz
Zardoz
3 years ago
Reply to  FromBrussels
So angry about clown witch visit comrade! Put down your toilet emails! Potato is waiting for you in mother russia!
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FromBrussels
FromBrussels
3 years ago
Reply to  Zardoz
talking potato again d*head ? You hungry maybe? No lack of potato within the realms of your canadian autocracy, is there ?
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PapaDave
Zardoz
Zardoz
3 years ago
Reply to  PapaDave
Da! Is true! Comrade Putin keep all Russian moneys safe in castle. Are 35 million Russians that would waste money on flush toilet when can poop in outhouse just fin e! They have potato! What more they want?
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Lisa_Hooker
Lisa_Hooker
3 years ago
Reply to  FromBrussels
I’m happy to see that you’ve calmed down a bit.
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JeffD
JeffD
3 years ago
Since reported earnings are nominal, CPI growth is 8.5% and growing, and wage growth is well below CPI and slowing, it could happen.
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Dutoit
Anon1970
Anon1970
3 years ago
Reply to  Dutoit
Michael Snyder has been preaching doom and gloom for years.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Reply to  Dutoit
Probably Russian cyberattacks.
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FromBrussels
FromBrussels
3 years ago
Reply to  Dutoit
The way things are evolving, there soon won t be no money to be made on foodprocessing, when your communist government imposes price controls….Better burn the plant down and cash in on insurance money….Well, maybe I am wrong and it is merely my suspicious analytic mind getting the best of me …again…
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Zardoz
Zardoz
3 years ago
Reply to  FromBrussels
There will always be potato, comrade. No need process.
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Casual_Observer2020
Casual_Observer2020
3 years ago
This all has a 2007/2008 feel to it. The Fed hiked rates and the market went south and started blowing up funds.
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thimk
thimk
3 years ago
no matter how you slice or dice it , it’s going to be a long hot summer
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PapaDave
PapaDave
3 years ago
“You may be shocked to learn that people want to value your company on FCF and earnings.“
Most of the oil stocks I own trade at 1.5 to 4 times FCF based on $90 WTI. Breakevens range from $35 to $45 WTI. I like those valuations.
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Six000mileyear
Six000mileyear
3 years ago
Earnings estimates have been moot for the last 40 years because stocks have grown overvalued gradually. And you have to wonder if there is any value to earning estimates when a company like United Technologies now Raytheon Technologies consistently beats estimates. If analysts underestimate previous estimates, then they should be adjusting their estimates higher to be more accurate. A few earnings misses is statistically expected.
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Lisa_Hooker
Lisa_Hooker
3 years ago
Reply to  Six000mileyear
I guess the trick is estimating what the estimates are going to be.
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whirlaway
whirlaway
3 years ago
I always felt that the Fed would not be able to take short-term rates to 1 percent without causing a crash. Now, it looks like the crash is happening well before they can get to that paltry level.
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killben
killben
3 years ago
Reply to  whirlaway
A stock market crash is not something to be bothered about when inflation is biting your hand pretty hard – https://www.youtube.com/watch?v=qcU5YhloPQg
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whirlaway
whirlaway
3 years ago
Reply to  killben
Falling stock prices and rising inflation can combine to deliver what is known in Harvard Business School parlance as a “double whammy”!
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killben
killben
3 years ago
Reply to  whirlaway
Yup! But enduring inflation will limit what the Fed is going to do to bail out the markets – e.g. no QE, no rate cuts – Just Imagine what it would to the psychology of the markets (when BTFD crowd realizes KINGKONG is not riding to their rescue) and where the markets can go. Also, food inflation is just getting started, china shutdown, war all adds to inflationary pressures. You can say it is the perfect storm for the Fed – comeuppance after the silly “Courage to act” idiot’s actions in starting QE in 2009. QE was like aspirin from then for the Fed. Anytime market goes down buy up everything in sight. Inflation has showed the Fed its place – no one else could do it. The Fed started thinking they were Kingkong.
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killben
killben
3 years ago
When this is done and dusted, you are likely to feel you have come out of a theater having seen a movie with ‘the Pied Piper’ Fed as the hero.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Warren Buffett rips Wall Street for turning the stock market into ‘a gambling parlor’
Retail traders flooded into the stock market during the pandemic, boosting share prices to records. Last year, the frenzy was fueled further by meme-inspired trading from Reddit message boards. But the stock market has turned this year, putting many of those new at-home traders in the red. The Nasdaq Composite, which holds many of the favorite names of small traders, is in a bear market, down more than 23% from its high after an April crush.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Reply to  Casual_Observer2020
I have another theory as to why the speculators have flooded the market. Sports betting was made legal in most states online over the last few years and allowed another source of money for stocks. This is also why more people continue to stay out of the labor market.
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Maximus_Minimus
Maximus_Minimus
3 years ago
Reply to  Casual_Observer2020
Are you kidding? Sports betting make some people temporary winners and many losers. Only the house wins.
The same with the stock market: it crashes when all are trying to convert the chips into cash.
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Zardoz
Zardoz
3 years ago
Reply to  Maximus_Minimus
A stock share is just a unit of crypto currency now
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Casual_Observer2020
Casual_Observer2020
3 years ago
Reply to  Maximus_Minimus
Nope not kidding. The bottom line is there are lot more people taking a lot more risk. Other sources of lesser discussed items driving the market: Hedge funds have gotten bigger because a lot of older people that died were rich and money went to their children who gave money to speculative asset classes in order to get more return. I know this because my BIL is in the hedge fund industry.
Just found out that neighbors down the street were laundering money from Jordan into real estate here in California. I guess I’m saying if you keep looking around, it seems the sources of money are all around all of us.
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Zardoz
Zardoz
3 years ago
Reply to  Casual_Observer2020
Another possibility is that people aren’t making enough money to progress or save for retirement. When you realize that the light at the end of the tunnel is a freight train coming your way, risk/reward calculations change drastically.
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Lisa_Hooker
Lisa_Hooker
3 years ago
Reply to  Zardoz
Bingo!
A lot of younger folks are realizing that there is no point in saving for what you will not ever achieve.
Laissez les bons temps rouler.
Eat drink and be merry.
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