Wednesday, July 17, 2024

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” report of July 12, 2024:

from page 26:

(click on charts to enlarge images)

S&P500 EPS

from page 27:

S&P500 EPS 2014-2025

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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 5604.65 as this post is written

Tuesday, July 16, 2024

S&P500 EPS Forecasts For 2024-2026 As Of July 12, 2024

As many are aware, Refinitiv 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 July 12, 2024, 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/share; the Year 2016 value is $118.10/share; the Year 2017 value is $132.00/share; the Year 2018 value is $161.93/share; the Year 2019 value is $162.93/share; the Year 2020 value is $139.72/share; the year 2021 value is $208.12/share; the year 2022 value is $218.09/share; and the year 2023 value is $221.36/share:

Year 2024 estimate:

$243.38/share

Year 2025 estimate:

$278.61/share

Year 2026 estimate:

$316.44/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 5656.00 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2024 – 2025 – July 11, 2026

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 of July 11, 2024:

Year 2024 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $239.04/share

-From a “bottom up” perspective, “as reported” earnings of $216.67/share

Year 2025 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $276.49/share

-From a “bottom up” perspective, “as reported” earnings of $254.01/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 5652.97 as this post is written

Monday, July 15, 2024

Disturbing Charts (Update 54)

The following is the latest update of 10 charts that depict various aspects of the U.S. economic and financial situation.

I find these charts portray disturbing long-term trends. These trends have been in effect for years.

These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

All of these charts are from the Federal Reserve, and represent the most recently updated data.

(click on charts to enlarge images)

Housing starts (last update June 20, 2024):

HOUST 1277

U.S. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, July 14, 2024.

The Federal Deficit (last updated March 11, 2024):

FYFSD -1693725

U.S. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, July 14, 2024.

Federal Net Outlays (last updated March 11, 2024):

FYONET 6134672

U.S. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, July 14, 2024.

State & Local Personal Income Tax Receipts (% Change from Year Ago)(last updated March 28, 2024):

ASLPITAX -10.8 Percent Change From Year Ago

U.S. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, July 14, 2024.

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated July 12, 2024):

TOTLL 2.8 Percent Change From Year Ago

Board of Governors of the Federal Reserve System (US), Loans and Leases in Bank Credit, All Commercial Banks [TOTLL], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTLL/, July 14, 2024.

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated July 12, 2024):

TOTBKCR 2.5 Percent Change From Year Ago

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, July 14, 2024.

M1 Money Multiplier Proxy:

MULT Proxy

Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, July 15, 2024.

Median Duration of Unemployment (last updated July 5, 2024):

Median Weeks Unemployed

U.S. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, July 15, 2024.

Labor Force Participation Rate (last updated July 5, 2024):

Labor Force Participation Rate

U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, July 15, 2024.

The Chicago Fed National Activity Index Three Month Moving Average (CFNAI-MA3)(last updated June 25, 2024):

CFNAIMA3

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFNAIMA3/, July 15, 2024.

I will continue to update these charts on an intermittent basis as they deserve close monitoring…

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 5649.86 as this post is written

Saturday, July 13, 2024

The July 2024 Wall Street Journal Economic Forecast Survey

The July 2024 Wall Street Journal Economic Forecast Survey was published on July 11, 2024. The headline is “’Economists Say Inflation Would Be Worse Under Trump Than Biden.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the forecasts section.

An excerpt:

Consumer prices have risen 19% since Biden took office in January 2021, fueled by a rush of government spending, some of it enacted under Trump; shortages of goods and labor; and supply-chain disruption in the wake of the pandemic. During Trump’s four years as president, prices increased 7.8%. 

On Thursday, the Labor Department reported that year-over-year inflation as measured by the consumer-price index fell to 3% in June from 3.3% in May. Economists surveyed by the Journal expect it to ease to 2.8% by December and 2.3% by the end of next year. 

As seen in the “Recession Probability” section, the average response as to whether the economy will be in a recession within the next 12 months was 28%. The individual estimates, of those who responded, ranged from 1% to 55%.  For reference, the average response in April’s survey [the previously published survey] was 29%.

As stated in the article, the survey’s 68 respondents were academic, financial and business economists.  The survey was conducted July 5 – July 9. Not every economist answered every question.

Economic Forecasts

The current average forecasts among economists polled include the following:

GDP:

full-year 2024:  1.66%

full-year 2025:  1.90%

full-year 2026:  2.05%

Unemployment Rate:

December 2024: 4.18%

December 2025: 4.20%

December 2026: 4.11%

10-Year Treasury Yield:

December 2024: 4.12%

December 2025: 3.87%

December 2026: 3.76%

CPI:

December 2024:  2.83%

December 2025:  2.31%

December 2026:  2.21%

Core PCE:

full-year 2024:  2.67%

full-year 2025:  2.17%

full-year 2026:  2.06%

(note: I have highlighted this WSJ Economic Forecast survey each time it is published; it was published monthly until April 2021, after which the survey is conducted (at least) every three months; 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 5615.31 as this post is written

Markets During Periods Of Federal Reserve Intervention – July 13, 2024

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.

For reference purposes, here is an updated chart (through July 12, 2024) from the Advisor Perspectives’ site post of July 12, 2024 (“Treasury Yields Snapshot: July 12, 2024“):

S&P500 And Federal Reserve Intervention

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 5615.35 as this post is written

Thursday, July 11, 2024

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI4) is one index that is supposed to measure stress in the financial system. Its reading as of the July 11, 2024 update (reflecting data through July 5, 2024) is -.8206:

STLFSI4

source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI4], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed July 11, 2024: https://fred.stlouisfed.org/series/STLFSI4

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 July 10, 2024 incorporating data from January 8, 1971 through July 5, 2024 on a weekly basis.  The July 5 value is -.52880:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 11, 2024:  
http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on July 10, 2024 incorporating data from January 8, 1971 through July 5, 2024, on a weekly basis.  The July 5, 2024 value is -.47829:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed July 11, 2024:  
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 5624.31 as this post is written

Recession Probability Models – July 2024

There are a variety of economic models that are supposed to predict the probabilities of recession.

While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.

The first is the “Yield Curve as a Leading Indicator” from the New York Federal Reserve.  I wrote a post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.”

Currently (last updated July 7, 2024 using data through June 2024) this “Yield Curve” model shows a 55.8276% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 51.8178% probability through May 2024, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

Additional details and explanations can be seen on the “U.S. Recession Probabilities” page.

This model, last updated on July 1, 2024 currently shows a .28% probability using data through May 2024.

Here is the FRED chart:

Smoothed U.S. Recession Probabilities

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed July 11, 2024:  
http://research.stlouisfed.org/fred2/series/RECPROUSM156N

The two models featured above can be compared against measures seen in recent posts.  For instance, as seen in the April 14, 2024 post titled “The April 2024 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 29% probability of a U.S. recession within the next 12 months.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 5632.05 as this post is written