Earnings Scorecard: For Q4 2022 (with 11% of S&P 500 companies reporting actual results), 67% of S&P 500 companies have reported a positive EPS surprise and 64% of S&P 500 companies have reported a positive revenue surprise.
Earnings Scorecard: For Q4 2022 (with 11% of S&P 500 companies reporting actual results), 67% of S&P 500 companies have reported a positive EPS surprise and 64% of S&P 500 companies have reported a positive revenue surprise.
BUT
SP500 is looking at flat earnings growth at best. And I'm sure if you take out the energy sector SP500 earnings would drop much more substantially.
FactSet @FactSet · Jan 18 $SPX is now expected to report Y/Y earnings declines for Q1 2023 (-0.6%) and Q2 2023 (-0.7%).
Earnings Scorecard: For Q4 2022 (with 11% of S&P 500 companies reporting actual results), 67% of S&P 500 companies have reported a positive EPS surprise and 64% of S&P 500 companies have reported a positive revenue surprise.
BUT
SP500 is looking at flat earnings growth at best. And I'm sure if you take out the energy sector SP500 earnings would drop much more substantially.
FactSet @FactSet · Jan 18 $SPX is now expected to report Y/Y earnings declines for Q1 2023 (-0.6%) and Q2 2023 (-0.7%).
From 1/20/2023 Factset report:
“What is driving the continuing decline in net profit margins for the S&P 500? Higher costs are likely having a negative impact on net profit margins. Producer prices increased by 6.2% in December. Again, although the number has been falling over the past several months, the percentage has exceeded 6.0% (year-over-year) for 21 straight months. During the previous earnings season, 402 S&P 500 companies cited “inflation” on earnings calls for the third quarter, which was the third-highest number in more than 10 years. Companies may be having more difficulty raising prices to offset higher costs, as the S&P 500 is reporting its lowest revenue growth for Q4 2022 (3.7%) since Q4 2020 (3.2%).
In addition, companies are facing a difficult year-over-year comparison to unusually high net profit margins in 2021. In Q4 2021, the S&P 500 recorded the fourth-highest net profit margin (12.4%) reported by the index since FactSet began tracking this metric in 2008.
It is interesting to note that analysts believe net profit margins for the S&P 500 will be higher going forward. As of today, the estimated net profit margins for Q1 2023, Q2 2023, Q3 2023, and Q4 2023 are 11.9%, 12.1%, 12.3%, and 12.2%, respectively.”
The highest previous 52 week non-GAAP EPS was recorded on 3/31/2022 at $210.16 when the index closed at 4530.41. The one year forward high non-GAAP EPS estimate was made on 6/30/2022 at $249.01 when the S&P 500 closed at 3785.38. On 12/31/22 the non-GAAP EPS for the year was estimated at $200.12 with forward 2023 EPS $226.40, and index close at 3939.50. Currently the non-GAAP estimate for 2022 has fallen to $199.76 with GAAP at $180.30, while the one year forward for 2023 lowered to $225.35. The EPS recorded highs before Government pandemic explosion of stimulus and handouts was 2019 with non-GAAP $157.12 and GAAP $139.49, when the index closed the year at 3230.78.
The Republican Tax Cut and Jobs Act of 2017 reduced the corporate tax rate from 35% to 21%. S&P 500 corporate tax cuts took a quarterly average rate to a low of 13.22% Q4 2018, recently rising to 20.05% Q2 2022. In 1993 the average for the year was 31.08%. Prior to the the tax cut the S&P 500 closed 2017 at 2673.81 with non-GAAP EPS at $124.51 and GAAP at $109.88.
Conclusion, it is not hard to see S&P 500 EPS falling for a variety of reasons, yet some investors continue to expect a benign outcome. I continue to short the market on rallies, and tactically cover on rollovers.
Three month return. From a lowish point in the market - we can see how far the market has bounced, and which parts of the market have done best.
Peloton +49%
China +36
ON Shoes +31
Non-US developed +24
Emerging +19
Materials +19
Gold +18
BTC +18
REITs +15
Retail +15
Industrials +15
Emerging ex-China +14
Financials +13
COWZ +12
Utils +12
Corp Bonds +12
Small Caps +12
Schwab Div ETF +12
Global 60/40 +11
Value +11
Tech +9
SP500 +9
Healthcare +9
Junk +8
Staples sector +8
Energy +8
Comms sector +7
Inter Treas +6
ST Junk +6
ST Corp Bonds +5
Commodities +5
TIPS +4
ARKK +4
Cons Discretionary +3
Hussman 0
Clean Energy 0
Weed -7
SARK -11
GME -20
TSLA -36%
I'm going to toss a good chunk of money at the healthcare sector - it never loses. Just keeps going up and up. Probably because of the aging nations and that's where so much of our young brain power is going.
Interesting that energy has been underperforming, albeit slightly
Big star is non-US developed and emerging. Looks like Europe will avoid recession, which is astonishing. Lower dollar helping emerging. Contemporary capitalism knows what it's freaking doing.
ARKK +4 but SARK down 11%. Sounds like the ETF broke a little bit.
Investment quality corporate bonds repaired a lot of the historic damage. Good to see.
Looks like cyclicals have bounced back as we came to understand the 4Q is growing very fast and maybe the 1Q will also.
Biggest question in my world is what to do with non-US stocks. We're all, all of us, underweight non-US. I've started fixing that but should I do it gradually or very quickly? Such a hard decision.
I'm regretting not buying ON shoes. I knew good stuff was going on there.
COWZ beating the market.
Markets are repairing themselves. A global 60/40 portfolio is down just 9% over the last 52 weeks. Not too bad.
“Everybody you talk to says oh, well, I need to wait for the Fed to cut interest rates again.
And then I can go back to buying Amazon and go back to buying Tesla and go back to buying Facebook. As soon as that happens. Forget it. Forget it. That bubble has now imploded. The markets already moving on to something else to me sitting around waiting all day for the Fed to cut interest rates so I can buy Facebook again, makes about as much sense as being in Tokyo in 1992. And thinking oh, when is the BOJ going to cut so I can buy bank of Tokyo Mitsubishi again? You had some great rallies in Japan through the ’90s. And you know, you could trade those rallies, but you want to play the fundamental trends and not a lot of people made money, and even though you had big rallies, not a lot of people made money in Japan in the ’90s because structurally, you were in a bear market. Again, bear markets are there for a reason. We’re in a bear market, bear markets are there to change the leadership, the bear markets 2011, it allowed to change leadership from everything’s about China to everything’s about U.S. tech. For me, the bear markets we’re in now is telling us time to change the leadership.”
“Everybody you talk to says oh, well, I need to wait for the Fed to cut interest rates again.
And then I can go back to buying Amazon and go back to buying Tesla and go back to buying Facebook. As soon as that happens. Forget it. Forget it. That bubble has now imploded. The markets already moving on to something else to me sitting around waiting all day for the Fed to cut interest rates so I can buy Facebook again, makes about as much sense as being in Tokyo in 1992. And thinking oh, when is the BOJ going to cut so I can buy bank of Tokyo Mitsubishi again? You had some great rallies in Japan through the ’90s. And you know, you could trade those rallies, but you want to play the fundamental trends and not a lot of people made money, and even though you had big rallies, not a lot of people made money in Japan in the ’90s because structurally, you were in a bear market. Again, bear markets are there for a reason. We’re in a bear market, bear markets are there to change the leadership, the bear markets 2011, it allowed to change leadership from everything’s about China to everything’s about U.S. tech. For me, the bear markets we’re in now is telling us time to change the leadership.”
Louis-Vincent Gavel
really fascinating question on when big tech will regain leadership in this market.
their business models are solid, cash is rolling in, headcount is reduced at some, balance sheets are good, massive amount of brain power at those companies...but that might not support their still! high valuations.
I'm sure big tech will again lead the market - they are among the best companies in the world after all - but stocks are not direct measures of business success.
“Everybody you talk to says oh, well, I need to wait for the Fed to cut interest rates again.
And then I can go back to buying Amazon and go back to buying Tesla and go back to buying Facebook. As soon as that happens. Forget it. Forget it. That bubble has now imploded. The markets already moving on to something else to me sitting around waiting all day for the Fed to cut interest rates so I can buy Facebook again, makes about as much sense as being in Tokyo in 1992. And thinking oh, when is the BOJ going to cut so I can buy bank of Tokyo Mitsubishi again? You had some great rallies in Japan through the ’90s. And you know, you could trade those rallies, but you want to play the fundamental trends and not a lot of people made money, and even though you had big rallies, not a lot of people made money in Japan in the ’90s because structurally, you were in a bear market. Again, bear markets are there for a reason. We’re in a bear market, bear markets are there to change the leadership, the bear markets 2011, it allowed to change leadership from everything’s about China to everything’s about U.S. tech. For me, the bear markets we’re in now is telling us time to change the leadership.”
Louis-Vincent Gavel
really fascinating question on when big tech will regain leadership in this market.
their business models are solid, cash is rolling in, headcount is reduced at some, balance sheets are good, massive amount of brain power at those companies...but that might not support their still! high valuations.
I'm sure big tech will again lead the market - they are among the best companies in the world after all - but stocks are not direct measures of business success.
It seems to me your three month list of asset returns shows many investors are holding on to the same themes. Buying a Peleton, for instance, believing there is some value there. I think that is pretty typical behavior in bear market rallies. Belief in the past regime is hard to shake. This has been born out a couple of this over the past year.
Businesses ebb and flow. No one cares. No one things this is going to have implications beyond the tech. sector, that coincidentally just experienced a boom cycle fall larger than the current downturn.
Again, no one cares, beyond a concern for the good people in that sector who may be effected.
There's a lot written about this so I don't feel its necessary to start regurgitating the reasons.
Businesses ebb and flow. No one cares. No one things this is going to have implications beyond the tech. sector, that coincidentally just experienced a boom cycle fall larger than the current downturn.
Again, no one cares, beyond a concern for the good people in that sector who may be effected.
There's a lot written about this so I don't feel its necessary to start regurgitating the reasons.
What I mean to say, this is the byline nowadays.
The real handwringing is what might become if congress fails to raise the debt ceiling. If I were prone to worrying, I think I would fixate there.
Just as Igy is prone to be bearish, I am usually bullish on the market ESPECIALLY after a brutal year. But the markets, over time, always go up! I am feeling really good (am sure Igy will put a damper cloth on my optimism) about 2023 and can see the markets returning 20- to 30% for the year.
Just as Igy is prone to be bearish, I am usually bullish on the market ESPECIALLY after a brutal year. But the markets, over time, always go up! I am feeling really good (am sure Igy will put a damper cloth on my optimism) about 2023 and can see the markets returning 20- to 30% for the year.
I have been aggressively adding to short positions. Interestingly, John Hussman’s January Market Commentary out today in part addresses what I think is the Bullish mistaken assumption.
“As the Buddha taught, “All things appear and disappear because of the concurrence of causes and conditions. Nothing ever exists entirely alone; everything is in relation to everything else.” With interest rates now well above zero, the primary causes and conditions of the recent speculative bubble are no longer in place. The persistence of rich valuations here are, in my view, largely the result of psychological anchoring and hindsight that treats past prices as a standard of value. We saw the same thing during the 2000-2002 collapse, and it’s dangerous. I had friends who were wiped out, not by buying at the top, but by assuming that once prices had declined by 15%, or 20%, or in some cases 50% from the highs, the retreat somehow represented “value.”
I’ll say this again. Value is not measured by how far prices have declined, but by the relationship between prices and properly discounted cash flows. We presently estimate that the S&P 500 would have to drop to the 2800 level simply to establish prospective 10-year returns equal to those of 10-year Treasury bonds. Restoring a historically run-of-the-mill 5% expected return over-and-above Treasury bond yields would require a decline to the 1850 level. Restoring historically run-of-the-mill 10% expected long-term returns for the S&P 500 would require, by our estimates, a decline to the 1600 level.”
Businesses ebb and flow. No one cares. No one things this is going to have implications beyond the tech. sector, that coincidentally just experienced a boom cycle fall larger than the current downturn.
Again, no one cares, beyond a concern for the good people in that sector who may be effected.
There's a lot written about this so I don't feel its necessary to start regurgitating the reasons.
It shows the largest companies are getting their margins squeezed. Same for Google, deferring bonuses a quarter. That’s what.
