ChartBrief #15 S&P 500 US Earnings Outlook

ChartBrief #15 S&P 500 US Earnings Outlook

Here’s a chart I find particularly interesting. As Q3 earnings season kicks off this month a question on many investors’ minds is whether the US earnings recession is over. The chart below shows the ECRI Weekly Leading Index vs the year-on-year change in S&P 500 forward earnings. It seems whenever the ECRI WLI turns up it has flagged the end of earnings downturns e.g. 1992, 2002, 2009.

So I don’t see anything obvious that would make me think this time is any different. In terms of drivers of an earnings recovery you only need to look at the factors that caused the slump in earnings i.e. strong US dollar & commodity collapse, both of which have become less of an issue – and then notice sectors like energy and materials starting to recover (IT and consumer staple are also seeing earnings outlook improvement). So unless we get blind-sided by a surprise recession, US corporate earnings look set to recover. This is very important for the market outlook, particularly in an environment where many are stressing over the level of absolute valuations – a recovery in earnings will most likely fix the overvaluation argument…

Bottom line: US corporate earnings look set to recover in the coming quarters.

Li Lu And Greenwald On Competitive Advantages And Value Investing

Li LuIn April, Li Lu and Bruce Greenwald took part in a discussion at the 13th Annual Columbia China Business Conference. The value investor and professor discussed multiple topics, including the value investing philosophy and the qualities Li looks for when evaluating potential investments. Q3 2021 hedge fund letters, conferences and more How Value Investing Has Read More

This chart appeared in the “Weekly Macro Themes” publication from Topdown Charts Institutional – please let us know if you would like a trial.


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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.
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