Are Earnings Expectations Overly Optimistic?
Across the S&P 500 companies, Q1 2019 earnings came out in line with the growth deceleration highlighted in our proprietary Growth Nowcasters: lower. Yet, as our chart shows, analysts are now expecting a rebound in earnings-per-share (EPS) and sales by year-end. However, for these expectations to become a reality, macro conditions would need to improve markedly. From our perspective, we are seeing signs of economic growth stabilisation around potential. While this is positive in the sense that recession risk has diminished, we do not yet see a re-acceleration of growth back to the levels seen in mid-2017 to mid-2018. For that, we have a long way to go.
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