This was a relevant post by David Templeton of Horan Capital Advisors this week.
I thought it was best addressed by doing a quick spreadsheet on updating the EPS estimates for the Top 10 Market Cap weights in the SP 500, and because Financials and Transports have endured a couple of brutal weeks, looking at the Top 9 Financial weights in the SP 500 and seeing how 2019 estimates have changed from a relative and absolute perspective.
This excel spreadsheet was an update of this original post in mid-November ’18 which looked at 2019 EPS trends for the top 10 weights in the SP 500.
Facebook looks to have stabilized while Apple and Exxon have gotten worse meaning that the EPS estimates for Apple and Exxon have seen further negative revisions (probably a surprise to no one).
Added to the spreadsheet was the Top 9 Financial weights in the SP 500 and what their estimates look like for 2019.
Both the “estimate revision trend” and the absolute growth in 2019 for Financials look pretty good, in fact both are positive.
Are the estimates wrong, and thus the analysts wrong, or does the market have it wrong ?
Two great charts from Chris Kimble of Kimble Charting Solutions:
These charts were published this week to show the precarious technical nature of the banks.
Summary / conclusion: A year ago, the SP 500 was about to finish a year where the key benchmark returned 21%, and everyone seemed bullish. This year, just the opposite has happened, and the sentiment heading into year end ’18 is just awful.
The Financial overweight was our worst call for clients this year. What banks do here into year-end, with the Fed expected to boost the fed funds rate another 25 basis points next week, moving fed funds to 2.50%.
More to come tomorrow.
Thanks for reading.