{"id":7545,"date":"2018-02-07T20:24:44","date_gmt":"2018-02-07T20:24:44","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=7545"},"modified":"2018-02-07T20:24:44","modified_gmt":"2018-02-07T20:24:44","slug":"what-years-saw-strong-sp-500-earnings-growth-but-little-return-on-the-benchmark","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=7545","title":{"rendered":"What Years Saw Strong SP 500 Earnings Growth but Little Return on the Benchmark ?"},"content":{"rendered":"<p>The two most glaring examples are 1994 and 2011.<\/p>\n<p>We&#8217;ve written about these years before as examples of years where SP 500 earnings growth was strong and yet the SP 500 return for that calendar year was minimal.<\/p>\n<p>1994 was the year Alan Greenspan surprised everybody with 6 fed funds rate hikes, starting in early February, 1994, but it was also a year where the Clinton&#8217;s Healthcare reform failed, and then later in 1994, the Mexican peso was devalued and Orange County <a href=\"http:\/\/www.nytimes.com\/1994\/12\/09\/business\/a-default-by-orange-county.html\">defaulted<\/a>\u00a0thanks to leveraged bets on the short-end of the yield curve.<\/p>\n<p>That year SP 500 earnings grew 20% and the SP 500 returned 1% on the calendar year.<\/p>\n<p>Don&#8217;t forget too 2011, when the Greek and Euro debt crisis reared its ugly head and the SP 500 corrected 20% from May to early October, 2011.<\/p>\n<p>SP 500 earnings grew 15% that year, led by Energy, Technology, while Financials and Housing were still digging out of the 2008 mess, while the SP 500 finished about 2% higher.<\/p>\n<p>In the <a href=\"https:\/\/fundamentalis.com\/?p=7424\">mid-December blog post<\/a> before the 2018 forecasts, it was noted that readers haven&#8217;t seen a year of &#8220;P.E contraction&#8221; since 2011.<\/p>\n<p>While the market has pretty much adjusted to 3 &#8211; 4 fed funds rate hikes this year, the move in the 10-year Treasury yield already in the first 5 &#8211; 6 weeks of the year has been noticed. 2.40% to 2.84% is still manageable but over the 2013 highs of 3.00% &#8211; 3.03% and that will get peoples attention.<\/p>\n<p>Our forecast of an SP 500 return of 7% &#8211; 12% this year means that the year will fall far short of expected earnings growth for the benchmark, with SP 500 earnings growth of 18% expected.<\/p>\n<p>We&#8217;ll see how the year unfolds. 1994 &#8211; with rising rates at the short and long end all year &#8211; saw the market trade like it was running a marathon with a piano on its back.<\/p>\n<p>Kind of like the last two weeks.<\/p>\n<p>Thanks for reading&#8230;<\/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 two most glaring examples are 1994 and 2011. We&#8217;ve written about these years before as examples of years where&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":[140],"tags":[],"class_list":["post-7545","post","type-post","status-publish","format-standard","hentry","category-pe-expansion-contraction"],"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\/7545","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=7545"}],"version-history":[{"count":3,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7545\/revisions"}],"predecessor-version":[{"id":7548,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7545\/revisions\/7548"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7545"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7545"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7545"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}