Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of November 16, 2018:

from page 21:

(click on charts to enlarge images)

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from page 22:

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2690.73 as this post is written

S&P500 EPS Forecasts For Years Through 2018, 2019, And 2020

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings label)

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of November 19, 2018, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share, the Year 2015 value is $117.46, the Year 2016 value is $118.10/share, and the Year 2017 value is $132.00/share:

Year 2018 estimate:

$162.79/share

Year 2019 estimate:

$176.88/share

Year 2020 estimate:

$195.26/share

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2716.85 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2018 2019 – November 15, 2018

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings label)

For reference purposes, the most current estimates are reflected below, and are as November 15, 2018:

Year 2018 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $157.84/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $141.56/share

Year 2019 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $175.06/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $160.17/share

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2736.27 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – November 16, 2018 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from the Doug Short site’s ECRI update post of November 16, 2018 titled “ECRI Weekly Leading Index Update:  ‘Construction Crumbling’.”  These charts are on a weekly basis through the November 16, 2018 release, indicating data through November 9, 2018.

Here is the ECRI WLI (defined at ECRI’s glossary):

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This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

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This last chart depicts, on a long-term basis, the WLI, Gr.:

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2727.82 as this post is written

The November 2018 Wall Street Journal Economic Forecast Survey

The November 2018 Wall Street Journal Economic Forecast Survey was published on October 11, 2018.  The headline is “Economists Split on Whether Outcome of Midterms Will Increase or Decrease Uncertainty.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

Two excerpts:

Half of economists expected the next recession to start in 2020—the year of the next presidential election—and just over 70% of respondents said that there was a greater risk that economic growth would undershoot their forecasts over the next 12 months than overshoot.

also:

One point economists appeared to agree on is they expected the labor market to remain strong.

They estimated employers need to add just over 127,000 jobs a month over the next 12 months for the U.S. economy absorb new workers into the labor force and hold the unemployment rate steady.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 19.55%. The individual estimates, of those who responded, ranged from 0% to 50%.  For reference, the average response in October’s survey was 17.64%.

As stated in the article, the survey’s respondents were 58 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted November 9 – November 13, 2018.

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The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  3.1%

full-year 2019:  2.3%

full-year 2020:  1.8%

full-year 2021:  1.8%

Unemployment Rate:

December 2018: 3.6%

December 2019: 3.5%

December 2020: 3.6%

December 2021: 3.9%

10-Year Treasury Yield:

December 2018: 3.23%

December 2019: 3.53%

December 2020: 3.45%

December 2021: 3.47%

CPI:

December 2018:  2.30%

December 2019:  2.40%

December 2020:  2.20%

December 2021:  2.20%

Crude Oil  ($ per bbl):

for 12/31/2018: $64.00

for 12/31/2019: $65.27

for 12/31/2020: $63.13

for 12/31/2021: $61.94

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” label)

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2728.23 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the November 15, 2018 update (reflecting data through November 9, 2018) is -.998.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on November 15, 2018 incorporating data from January 8, 1971 through November 9, 2018, on a weekly basis.  The November 9 value is -.81:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 15, 2018:

http://research.stlouisfed.org/fred2/series/NFCI

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The ANFCI chart below was last updated on November 15, 2018 incorporating data from January 8,1971 through November 9, 2018, on a weekly basis.  The November 9 value is -.65:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 15, 2018:

http://research.stlouisfed.org/fred2/series/ANFCI

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2682.47 as this post is written

Walmart’s Q3 2019 Results – Comments

I found various notable items in Walmart’s Q3 2019 management call transcript (pdf) dated November 15, 2018.  (as well, there is Walmart’s press release of the Q3 results (pdf) and related presentation materials)

I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly management call comments; these previous posts are found under the “paycheck to paycheck” label.

Here are various excerpts that I find most notable:

comments from Brett Biggs, EVP & CFO, page 10, wrt Walmart U.S.:

Walmart U.S. delivered strong comp sales growth of 3.4 percent. We
started the quarter strong with a solid back-to-school season and finished
strong with solid sales of fall seasonal goods. Our omnichannel offering
continues to resonate with customers and drive momentum in this healthy
consumer environment. Keep in mind that we lapped last year’s comp
sales benefit of 30-50 basis points from hurricanes, with only a marginal
benefit from storms this year. On a two-year stacked basis, comp sales
increased 6.1 percent. Growth was strong across channels with store
traffic and ticket up 1.2 percent and 2.2 percent, respectively, while
eCommerce sales grew 43 percent and contributed approximately 140
basis points to the segment comp.

comments from Brett Biggs, EVP & CFO, page 11, wrt Walmart U.S.:

Walmart U.S. gross margin rate declined 28 basis points due
primarily to the pricing strategy, higher transportation expenses, and the
increasing mix of eCommerce growth, partially offset by the overlap from
last year’s hurricanes.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2701.58 as this post is written

Charts Indicating Economic Weakness – November 2018

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.  This post is the latest in a series of posts indicating U.S. economic weakness or a notably low growth rate.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.  As seen in the October 2018 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 3.1% GDP growth in 2018 and 2.4% GDP growth in 2019.  However,  there are other broad-based economic indicators that seem to imply a weaker growth rate.

As well, it should be remembered that GDP figures can be (substantially) revised.

Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict weak growth or contraction, and a brief comment for each:

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.  As well, the level of growth does not seem congruent to the (recent) levels of economic growth as seen in aggregate measures such as Real GDP.

“Total Federal Receipts” through October had a last value of $252,692 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value 7.4%, last updated November 13, 2018:

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed November 13, 2018:

https://fred.stlouisfed.org/series/MTSR133FMS

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Real Hourly Earnings

The level and growth rates of wages and household earnings continues to be (highly) problematical.  I have extensively discussed these worrisome trends in income and earnings.

As seen in many measures the problem is chronic (i.e long-term) in nature.

Shown below is a chart depicting the 12-month percent change in real average weekly earnings for all employees from January 2008 – September 2018.  As seen in the chart below, growth in this measure over the time period depicted has been intermittent, volatile, and, especially since 2017, weak:

source:  Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Real average weekly earnings increase 1.1 percent, September 2017 to September 2018 on the Internet at https://www.bls.gov/opub/ted/2018/real-average-weekly-earnings-increase-1-point-1-percent-september-2017-to-september-2018.htm(visited November 09, 2018).

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Unemployment

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 3.7%.  However, my analyses continue to indicate that the conclusion that employment is strong is incorrect.  While the unemployment rate indicates that unemployment is (very) low, closer examination indicates that this metric is, for a number of reasons, highly misleading.

My analyses indicate that the underlying dynamics of the unemployment situation remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how from an “all-things-considered” standpoint they will evolve in an economic and societal manner.  I have recently written of the current and future U.S. employment situation on the “U.S. Employment Trends” page.

While there are many charts that can be shown, one that depicts a worrisome trend is the  Civilian Labor Force Participation Rate for those with a Bachelor’s Degree and Higher, 25 years and over.  Among disconcerting aspects of this measure is the long-term (most notably the post-2009) trend, especially given this demographic segment.

The current value as of the November 2, 2018 update (reflecting data through the October employment report) is 73.4%:

source:  U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: Bachelor’s Degree and Higher, 25 years and over [LNS11327662], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed November 12, 2018:

https://fred.stlouisfed.org/series/LNS11327662

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New Home Sales

For numerous economic reasons, the number and price of homes sales, especially new home sales, is a very important aspect of the U.S. economy.

As an indication for the overall health of the overall new home sales market, below is the Dow Jones Home Construction Index, depicted on a weekly basis, LOG scale, from the year 2000 through the closing price of 635.79 on November 13, 2018.  As one can see, the latest peak was on January 24, 2018 at 1008.89:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

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Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness or economic contraction, if not outright (gravely) problematical economic conditions.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2722.18 as this post is written