{"id":12928,"date":"2022-05-27T14:35:40","date_gmt":"2022-05-27T20:35:40","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=12928"},"modified":"2022-05-27T14:35:40","modified_gmt":"2022-05-27T20:35:40","slug":"sp-500-earnings-estimates-slip-in-2023-recession-worries-start-to-multiply","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=12928","title":{"rendered":"SP 500 Earnings: Estimates Slip in 2023 \/ Recession Worries Start to Multiply"},"content":{"rendered":"<p>Looking at the capital markets action this week, credit spreads improved, the US dollar fell (as measured by the UUP), the 10-year and 30-year Treasury yields haven&#8217;t made new highs in weeks, the PCE deflator data came in as expected, and lower year-over-year, and stocks bounced sharply.<\/p>\n<p>This week&#8217;s returns:<\/p>\n<ul>\n<li><em><strong>UUP: <\/strong><\/em>-1.38%<\/li>\n<li><em><strong>HYG: <\/strong><\/em>+4.81%<\/li>\n<li><em><strong>JNK:<\/strong><\/em> +4.87%<\/li>\n<li><em><strong>AGG: <\/strong><\/em>+0.94%<\/li>\n<li><em><strong>SPY: <\/strong><\/em>+6.59%<\/li>\n<li><em><strong>Nasdaq Comp: <\/strong><\/em>+6.8%<\/li>\n<li><em><strong>QQQ: <\/strong><\/em>+7.07%<\/li>\n<\/ul>\n<p>You could call this week just a huge reversal of the 7 &#8211; 8 week trends.<\/p>\n<p>The SP 500, Nasdaq Composite and the Nasdaq 100 remain very oversold, which is a plus.<\/p>\n<p>The SP 500&#8217;s bounce off 3,800 last Friday was a significant move: as this blog pointed out a number of times, the 3,800 level on the SP 500 was a 1\/3rd retracement of the March &#8217;20 lows to the early January &#8217;22 highs, which is (symmetrically, anyway) a perfect pullback or correction that doesn&#8217;t have to indicate a secular bear market is at hand.<\/p>\n<p><em><strong>SP 500 data:\u00a0<\/strong><\/em><\/p>\n<ul>\n<li>The forward 4-quarter estimate fell to $233.49 from last week&#8217;s $235.22. The last 5 &#8211; 6 weeks has seen the forward estimate gyrate between $234 &#8211; $235 until this week;<\/li>\n<li>The PE ratio on the forward estimate rose to 17.7x from last week&#8217;s 16.5x based on the 6.2% increase in the SP 500 this week;<\/li>\n<li>The SP 500 earnings yield fell to 5.62% from 6.03% last week;<\/li>\n<li>The Q1 &#8217;22 bottom-up estimate for the SP 500 rose a penny to $54.85 from $54.84 last week;<\/li>\n<\/ul>\n<p>Watching expected quarterly EPS and revenue growth rates:<\/p>\n<p><a href=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-12932\" src=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722-300x89.png\" alt=\"\" width=\"300\" height=\"89\" srcset=\"https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722-300x89.png 300w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722-1024x304.png 1024w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722-150x44.png 150w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722-768x228.png 768w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722-1536x455.png 1536w, https:\/\/fundamentalis.com\/wp-content\/uploads\/2022\/05\/Sp500qtrlygrorates52722.png 1585w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><\/p>\n<p>Note the slippage in all the 2023 quarterly growth rates, for both SP 500 EPS and revenue. These tend to jump around, but the &#8217;23 EPS cuts stood out.<\/p>\n<p>Of the last 7 weeks for the forward 4-quarter estimate, 4 weeks showed sequential declines. The forward estimate tonight of $233.49 is almost exactly where it was on April 15th, 2022.<\/p>\n<p>It&#8217;s clear the sell-side is starting to become (at least) a bit more cautious as Q1 &#8217;22 earnings season ends, and those companies reporting a May quarter will soon start to report.<\/p>\n<p><em><strong>Summary \/ conclusion:<\/strong><\/em> The Treasury market hasn&#8217;t seen higher yields on the 10-year and 30-year for several weeks. Whether inflation rolling over, or worries over a recession starting, there is some tempering of the harsh &#8220;stagflation&#8221; argument beginning.<\/p>\n<p>The jobs report next Friday, June 3, 2022, will probably reflect another 300k &#8211; 400k quarter of &#8220;net new jobs added&#8221; for the US economy.<\/p>\n<p>There has been such a convoluted series of events happen over the last two years, including Ukraine, it&#8217;s hard to sort out the market implications for the various moving parts. Let&#8217;s sort out the variables:<\/p>\n<ul>\n<li>Lower inflation &#8211; definite plus for stocks and bonds. This morning&#8217;s PCE deflator was a start. Most aren&#8217;t on board the &#8220;disinflation&#8221; theme;<\/li>\n<li>Job growth: job losses are great for bonds, bad for stocks. Slower job growth and the potential for wage growth slowing a definite plus, more so for stocks and bonds;<\/li>\n<li>Falling dollar: a definite plus particularly for non-US;<\/li>\n<li>Economic data: it seemed to me with the stock market the last 3 weeks, worries over the US slipping into a recession seemed to increase markedly.<\/li>\n<\/ul>\n<p>Remember, for those of who were around in 1994, the FOMC and Greenspan raised rates 6 times, and the total return for 1994 for the SP 500 was +1%. 1995 was a monster rally in the SP 500 and that was 13 years into that secular bull market.<\/p>\n<p>Of everything that bounced this week, the high-yield returns were most encouraging. Spreads were widening probably due to duration as much as credit concerns.<\/p>\n<p>It&#8217;s all a guess. Take everything here with a grain of salt. None of this is a recommendation or advice.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Looking at the capital markets action this week, credit spreads improved, the US dollar fell (as measured by the UUP),&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":[190,126,208],"tags":[],"class_list":["post-12928","post","type-post","status-publish","format-standard","hentry","category-10-year-treasury-yield","category-us-dollar","category-us-jobs-growth"],"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\/12928","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=12928"}],"version-history":[{"count":10,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12928\/revisions"}],"predecessor-version":[{"id":12939,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12928\/revisions\/12939"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12928"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12928"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12928"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}