The third-quarter earnings season kicked off in earnest this week, but going-in expectations were for a lackluster performance. According to one analyst interviewed this week on Bloomberg Radio, the lack of clarity across many geopolitical issues is a major factor impacting the willingness for corporations to invest in their businesses, and, “One thing is certain—CEOs don’t like uncertainty.”
Data analytics firm FactSet has a slightly more negative outlook for Q3 S&P 500 earnings, providing the following outlook on October 11:
FIGURE 1: S&P 500 EARNINGS GROWTH/DECLINE BY SECTOR (Q3 2019 EST.)
FIGURE 2: S&P 500 REVENUE GROWTH/DECLINE BY SECTOR (Q3 2019 EST.)
Despite the current earnings outlook for Q3 2019, FactSet has some more positive estimates moving forward:
This improved earnings picture has led to a “bottom-up” analyst forecast for a rally in the S&P 500 over the next 12 months, says FactSet:
A 12-month increase of 13% in the S&P 500 would be impressive, and it would certainly break with the current trend of a range-bound market. As Figure 4 from Bespoke Investment Group shows, “U.S. equities have collectively done a whole lot of nothing over the last 18 months, and if you thought policy in Washington was at a standstill, it has nothing on the stock market. Despite some big short-term moves, the S&P 500 is currently at the same levels it was at last month, three months ago, six months ago, and one year ago.”
Source: Bespoke Investment Group
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