{"id":12211,"date":"2021-11-05T22:56:12","date_gmt":"2021-11-06T04:56:12","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=12211"},"modified":"2021-11-05T22:56:12","modified_gmt":"2021-11-06T04:56:12","slug":"sp-500-weekly-update-4-jump-in-21-estimate-2022-still-murky","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=12211","title":{"rendered":"SP 500 Weekly Update: $4 Jump in &#8217;21 Estimate; 2022 Still Murky"},"content":{"rendered":"<p>The SP 500 2021 full-year calendar estimate rose this week to $205.21 from $201.34, which is probably a function of the fact that &#8211; like the last week of July &#8217;21 &#8211; the &#8220;Big 5&#8221; all reported their earnings in the last week of October &#8217;21. The SP 500 EPS sequential dollar increase the last week of July &#8217;21 was over $5.<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12213\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521-300x77.png\" alt=\"\" width=\"300\" height=\"77\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521-300x77.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521-1024x263.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521-150x39.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521-768x198.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500fullyr20212022est11521.png 1403w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Data source: IBES by Refinitiv<\/p>\n<p>Look at the change in the 2021 EPS estimate this week, and then between July 23 and July 30. As explained above, the common factor was the Big 5 released their Q2 &#8217;21 financial results all in the same week.<\/p>\n<p>Note too the stability in 2022&#8217;s SP 500 estimate while 2023 rose $4 this week, which in and of itself is unusual. Not sure why a strategist boosted the 2023 EPS estimate so sharply when we are still 12 months away from the start of the year. Refinitiv (IBES data) doesn&#8217;t give subscribers the 2023 the 4 quarterly bottom-up estimates until late March &#8217;22 or roughly 8 &#8211; 9 months in advance of the year.<\/p>\n<p><em><strong>SP 500 metrics tracked weekly:\u00a0<\/strong><\/em><\/p>\n<ul>\n<li>The forward 4-quarter estimate declined sequentially this week to $214.95 from last week&#8217;s $215.32. In normal (non-pandemic) years there can be sequential declines in the forward estimate as forward quarters are tweaked and impacted by current events. It&#8217;s been rare since May &#8217;20 that a week has seen a sequential decline in the forward estimate, in fact there have only been 5 sequential declines in the estimate since July 1, &#8217;20 or the last 72 weeks.<\/li>\n<li>The PE ratio on the forward estimate is now 21.85 vs last week&#8217;s 21.4x.<\/li>\n<li>The SP 500 earnings yield fell to 4.58% from 4.68% last week thanks to the 2% rise in the SP 500 this week.<\/li>\n<li>The 3rd quarter bottom-up estimate this past week finished at $53.25, above the 2nd quarter bottom-up actual EPS of $52.58. Nick Colas over at Datatrek raised the issue in August &#8217;21 and Josh Brown picked up on it and talked about it briefly on CNBC, so that was worthwhile.<\/li>\n<li>Speaking of quarterly bottom-up estimates, Q4 &#8217;21 is just $51 and has been rotating around $51 since July 30 (see attached s\/sheet above). It&#8217;s now below Q3 &#8217;21, but that should begin to change after Jan 10 &#8217;22.<\/li>\n<\/ul>\n<p><em><strong>2022 by quarter<\/strong><\/em><\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12216\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521-300x157.png\" alt=\"\" width=\"300\" height=\"157\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521-300x157.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521-1024x536.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521-150x79.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521-768x402.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2021\/11\/Sp500qtrlygrorates11521.png 1190w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Q4 &#8217;21 is still seeing steady upward revisions to the SP 500 &#8220;expected&#8221; EPS and revenue growth rates but that&#8217;s about it. Understandably, the 2022 metrics are jumping all over the place since no analyst wants to stock his or her neck out.<\/p>\n<p>As a comparison, exactly one year ago, on November 6, &#8217;20, the &#8220;expected&#8221; SP 500 EPS growth rates for Q1 and Q2 of &#8217;21 were 15% and 43.8% respectively. Actual SP 500 EPS growth rates for Q1 and Q2 &#8217;20 were 52.8% and 96.3% respectively.<\/p>\n<p>2022 won&#8217;t see that kind of &#8220;upside surprise&#8221; but readers can see that these EPS estimates can be well off the mark, particularly when we see an event like a pandemic.<\/p>\n<p>The &#8220;average SP 500 EPS upside surprise&#8221; (Jeff Miller and I used to talk about this frequently and Ed Yardeni has written about, who is another good source of SP 500 EPS data) is 2% &#8211; 6% per quarter in a &#8220;normal&#8221; economy and normal markets. (A <a href=\"https:\/\/fundamentalis.com\/?p=12196\">blog post this week<\/a> talked about upside surprises.)<\/p>\n<p><em><strong>Summary \/ conclusion: <\/strong><\/em>Unless we start seeing upside earnings preannouncements in December &#8217;21, which I wouldn&#8217;t expect, it isn&#8217;t likely that we get a good grasp on what 2022 will look like until the Q4 &#8217;21 earnings releases starting January 10 &#8217;22, which also then will provide earnings guidance for full-year 2022.<\/p>\n<p>The story is the same now, and has been for a while. The thing is companies are saying demand is strong but material and labor shortages and other constraints are keeping a lid on what is likely a very strong economy. Q3 &#8217;21 GDP growth was depressed for a number of reasons, but according to JP Morgan, Q4 &#8217;21 GDP growth should rebound to 4% &#8211; 6%, which should bode well for 2022.<\/p>\n<p>This blog will keep showing the data every week but &#8220;price&#8221; (meaning market action) is everything.<\/p>\n<p>The 10-year and 30-year Treasury yields traded up 1.6% and 2% during the Powell presser on Wednesday and then the Treasury curve flattened sharply the next two days as the longer Treasury maturities rallied. (Probably not a great scenario for the financial sector.)<\/p>\n<p>2022 may turn out to be a pretty normal year. Investors probably shouldn&#8217;t expect a 25% annual return for the SP 500 again.<\/p>\n<p>Predictions and forecasts are easy though. Being right is a lot harder.<\/p>\n<p>Take everything you read on the blog with a lot of skepticism. In the capital markets, conditions change quickly.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The SP 500 2021 full-year calendar estimate rose this week to $205.21 from $201.34, which is probably a function of&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[91],"tags":[],"class_list":["post-12211","post","type-post","status-publish","format-standard","hentry","category-weekly-earnings-update"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12211","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12211"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12211\/revisions"}],"predecessor-version":[{"id":12225,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12211\/revisions\/12225"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12211"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12211"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12211"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}