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 February 10, 2017:

from page 19:

(click on charts to enlarge images)

S&P500 earnings trends

from page 20:

S&P500 annual earnings

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2347.22 as this post is written

S&P500 EPS Estimates 2016 Through 2018

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 tag)

The following estimates are from Exhibit 20 of the “S&P500 Earnings Scorecard” (pdf) of February 16, 2017, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share and the Year 2015 value is $117.46:

Year 2016 estimate:

$118.35/share

Year 2017 estimate:

$131.35/share

Year 2018 estimate:

$147.19/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2341.95 as this post is written

Standard & Poor’s S&P500 Earnings Estimates For 2016, 2017 And 2018 – As Of February 10, 2017

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 tag)

For reference purposes, the most current estimates are reflected below, and are as of February 10, 2017:

Year 2016 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $107.29/share

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

-From a “bottom up” perspective, “as reported” earnings of $97.68/share

Year 2017 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $130.76/share

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

-From a “bottom up” perspective, “as reported” earnings of $120.47/share

Year 2018 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $147.39/share

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

-From a “bottom up” perspective, “as reported” earnings of $131.79/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2343.79 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 February 9, 2017 update (reflecting data through February 3, 2017) is -1.211.

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 February 15, 2017 incorporating data from January 5,1973 through February 10, 2017, on a weekly basis.  The February 10, 2017 value is -.82:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 15, 2017:

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

The ANFCI chart below was last updated on February 15, 2017 incorporating data from January 5,1973 through February 10, 2017, on a weekly basis.  The February 10 value is -.18:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 15, 2017:

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 blog 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 2341.50 as this post is written

Philadelphia Fed – 1st Quarter 2017 Survey Of Professional Forecasters

The Philadelphia Fed 1st Quarter 2017 Survey of Professional Forecasters was released on February 10, 2017.  This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.

The survey shows, among many measures, the following median expectations:

Real GDP: (annual average level)

full-year 2017:  2.3%

full-year 2018:  2.4%

full-year 2019:  2.6%

full-year 2020:  2.1%

Unemployment Rate: (annual average level)

for 2017: 4.6%

for 2018: 4.5%

for 2019: 4.5%

for 2020: 4.6%

Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 7.7%, 11.2%, 14.6%, 16.2% and 17.7% for each of the quarters from Q1 2017 through Q1 2018, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2026) with the median expected inflation (annualized) of each.  Inflation is measured in Headline and Core CPI and Headline and Core PCE.  Over all time frames expectations are shown to be in the 1.8% to 2.5% range.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2317.66 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – February 10, 2017 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 Doug Short’s ECRI update post of February 10, 2017 titled “ECRI Weekly Leading Index: Another All-Time High.”  These charts are on a weekly basis through the February 10, 2017 release, indicating data through February 3, 2017.

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

ECRI WLI

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

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

ECRI WLI,Gr.

 

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2317.11 as this post is written

Zillow Q1 2017 Home Price Expectations Survey – Summary & Comments

On February 10, 2017, the Zillow Q1 2017 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

Two excerpts from the Press Release:

The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 housing experts and economists what factors would have the greatest impact on U.S. housing this year. The most frequent answer was rising mortgage rates and their impact on mortgage affordability, with more than half of panelists selecting itii.

also:

Home values rose 6.8 percent in 2016. Overall, the experts surveyed predict home prices will rise 4.6 percent in 2017, then slow to 3 percent annual growth by 2019.

“Compared to their outlook in our previous survey just a few months ago, most of our panelists now expect somewhat stronger home value appreciation this year and next, as tight inventory conditions persist,” said Pulsenomics founder Terry Loebs. “However, longer-term, the consensus still calls for decelerating prices, with the most pessimistic quartile of experts continuing to project negative inflation-adjusted returns for U.S. housing beyond 2017. The specter of rising mortgage rates and other affordability hurdles are clearly impacting these home value projections.”

Various Q1 2017 Zillow Home Price Expectations Survey charts are available, including that seen below:

Zillow U.S. Home Price Expectations survey chart

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q1 2017 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only six (of the displayed responses) forecasts a cumulative price decrease through 2021, and only one of those forecasts is for a double-digit percentage decline.  That forecast is from Mark Hanson, who foresees a 22.97% cumulative price decrease through 2021.

The Median Cumulative Home Price Appreciation for years 2017-2021 is seen as 4.55%, 8.68%, 11.82%, 14.70%, and 18.02% respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in Mark Hanson’s above-referenced forecast) will prove too optimistic in hindsight.  From a longer-term historical perspective, such a decline is very mild in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post titled “What’s Ahead For The Housing Market – A Look At The Charts.”

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2314.75 as this post is written

Deflation Probabilities – February 9, 2017 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2021.

A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.

As for the current weekly reading, the February 9, 2017 update states the following:

The 2015–20 and 2016–21 deflation probabilities have remained at 0 percent since November 3 and January 17, respectively. These 2015–20 and 2016–21 deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2015 and early 2016, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2015 and April 2016 and the 10-year TIPS issued in July 2010 and July 2011. We will continue updating the deflation probabilities file and chart weekly but will discontinue social media and update alerts until probabilities move above 0 percent.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2307.87 this post is written

The February 2017 Wall Street Journal Economic Forecast Survey

The February 2017 Wall Street Journal Economic Forecast Survey was published on February 9, 2017.  The headline is “Forecasters See Slow Progress in Labor-Market Measures Favored by Trump Administration.”

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:

Mr. Mnuchin also mentioned the U-6 rate, which includes the discouraged workers mentioned above and people who have part-time jobs but want full-time work.

This is the Labor Department’s broadest measure of unemployment, which stood at 9.4% in January. Over the next three years it is expected to decline to 8.7%, according to the average forecast. If correct, that, too, would be higher than the rate seen in previous booms.

also:

The survey respondents expect labor-force participation to rise to 63.3% by the end of 2019. The overall population will also grow over this period, according to Census Bureau projections (which already assume that immigration will slow), and so the number of people outside the labor force would likely remain around 95 million.

As stated in the article, the survey’s respondents were 62 academic, financial and business economists.  Not every economist answered every question.  The survey occurred on February 3, 2017 to February 7, 2017.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 15.09%. The individual estimates, of those who responded, ranged from 0% to 33%.  For reference, the average response in January’s survey was 16.49%.

The current average forecasts among economists polled include the following:

GDP:

full-year 2016:  1.9%

full-year 2017:  2.4%

full-year 2018:  2.5%

full-year 2019:  2.1%

Unemployment Rate:

December 2017: 4.5%

December 2018: 4.4%

December 2019: 4.5%

10-Year Treasury Yield:

December 2017: 2.86%

December 2018: 3.31%

CPI:

December 2017:  2.3%

December 2018:  2.4%

Crude Oil  ($ per bbl):

for 12/31/2017: $55.79

for 12/31/2018: $59.17

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

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 2308.81 as 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 February 2, 2017 update (reflecting data through January 27, 2017) is -1.21.

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 February 8, 2017 incorporating data from January 5,1973 through February 3, 2017, on a weekly basis.  The February 3, 2017 value is -.80:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 8, 2017:

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

The ANFCI chart below was last updated on February 8, 2017 incorporating data from January 5,1973 through February 3, 2017, on a weekly basis.  The February 3 value is -.18:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 8, 2017:

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 blog 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 2294.02 as this post is written