S&P500 “Bottom Up” EPS Forecasts Years 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 tag)

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of May 21, 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:

$160.71/share

Year 2019 estimate:

$175.91/share

Year 2020 estimate:

$192.59/share

_____

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 2733.01 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2018 2019 – May 16, 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 tag)

For reference purposes, the most current estimates are reflected below, and are as May 16, 2018:

Year 2018 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $157.09/share

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

-From a “bottom up” perspective, “as reported” earnings of $147.27/share

Year 2019 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $174.07/share

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

-From a “bottom up” perspective, “as reported” earnings of $163.33

_____

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 2734.0 as this post is written

Updates Of Economic Indicators May 2018

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The May 2018 Chicago Fed National Activity Index (CFNAI) updated as of May 21, 2018:

The CFNAI, with current reading of .34:

CFNAI_5-21-18 .34

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, May 21, 2018;

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

The CFNAI-MA3, with current reading of .46:

CFNAI-MA3

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, May 21, 2018;

https://fred.stlouisfed.org/series/CFNAIMA3

–

The ECRI WLI (Weekly Leading Index):

As of May 18, 2018 (incorporating data through May 11, 2018) the WLI was at 148.7 and the WLI, Gr. was at 4.3%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of May 18, 2018:

ECRI WLI,Gr. Since 2000 4.3 Percent

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The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting the ADS Index from December 31, 2007 through May 12, 2018:

ADS Index

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The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the May 17, 2018 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in April” (pdf) the LEI was at 109.4, the CEI was at 103.5, and the LAG was 104.7 in April.

An excerpt from the release:

“April’s increase and continued uptrend in the U.S. LEI suggest solid growth should continue in the second half of 2018. However, the LEI’s six-month growth rate has recently moderated somewhat, suggesting growth is unlikely to strongly accelerate,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “In April, stock prices and housing permits were the only negative contributors, whereas the labor market components, which made negative contributions in March, improved.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of May 17, 2018:

Conference Board LEI

_________

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 2734.29 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 18, 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 Doug Short’s ECRI update post of May 18, 2018 titled “ECRI Weekly Leading Index.”  These charts are on a weekly basis through the May 18, 2018 release, indicating data through May 11, 2018.

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 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 2714.80 as this post is written

Walmart’s Q1 2019 Results – Comments

I found various notable items in Walmart’s Q1 2019 management call transcript (pdf) dated May 17, 2018.  (as well, there is Walmart’s press release of the Q1 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” tag.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 2, wrt Walmart U.S.:

Walmart U.S. continues to perform well with comp sales growth,
excluding fuel, of 2.1 percent. Greg and the Walmart U.S. team continue to
strengthen our supercenters. We’ve improved our merchandising in areas
like fresh food with better lighting, an expanded deli offer, and an improved
bakery layout to make it easier for customers to navigate. We also recently
introduced new apparel brands with improved design, quality and value.
Customer experience scores continue to improve as we’ve lowered prices
and taken steps to make shopping with us easier and more enjoyable. We
aim to make shopping easy, fast, friendly and fun for customers, and our
team continues to make progress towards that goal. I continue to be
impressed by the progress the team is making on inventory management.
They’ve put together a string of 12 quarters of reduced comp store
inventory while maintaining strong in-stock levels. eCommerce sales
accelerated in the first quarter with 33 percent growth, and we expect to
grow sales about 40 percent for the full year. Sam’s Club comps improved
5.2 percent, excluding fuel and a 140 basis point decrease for tobacco.
Outside of the U.S., eight of eleven markets posted positive comp sales,
including our four largest markets of Mexico, U.K., China and Canada. So
overall, we feel pretty good about this quarter.

comments from Doug McMillon, President and CEO, page 3, wrt Walmart U.S.:

I’ll start with Walmart U.S.

In addition to comp sales growth of 2.1 percent, more people
shopped with us as comp traffic improved 0.8 percent. Comp sales were
trending higher through early April, but general merchandise sales and
traffic were somewhat negatively impacted by unseasonably cool weather
in April. 

comments from Brett Biggs, EVP & CFO, page 8, wrt Walmart U.S.:

Gross margin rate declined 23 basis points primarily due to price
investments and higher transportation expenses as a result of higher fuel
costs and third-party transportation rate pressures.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2722.46 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 May 10, 2018 update (reflecting data through MAY 4, 2018) is -1.056.

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 May 16, 2018 incorporating data from January 8, 1971 through May 11, 2018, on a weekly basis.  The May 11, 2018 value is -.81:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 16, 2018:

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

–

The ANFCI chart below was last updated on May 16, 2018 incorporating data from January 8,1971 through May 11, 2018, on a weekly basis.  The May 11 value is -.55:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 16, 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 2720.04 as this post is written

Charts Indicating Economic Weakness – May 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 May 2018 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.9% GDP growth in 2018.  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 April had a last value of $510,447 Million.  Shown below is  displayed on a “Percent Change From Year Ago” basis with value 12.0%, last updated May 10, 2018:

Total Federal Receipts Percent Change From Year Ago

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 11, 2018:

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

__

Commercial And Industrial Loans, All Commercial Banks

“Commercial And Industrial Loans, All Commercial Banks”  through April had a last value of $2162.8113 Billion.  The growth in such loans continues to be at a relatively low level.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 3.3%, last updated May 11, 2018:

BUSLOANS Percent Change From Year Ago

source:  Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks [BUSLOANS], retrieved from FRED, Federal Reserve Bank of St. Louis May 11, 2018:

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

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Underperformance Of Consumer Staples Stocks

In the March 23, 2017 post (“‘Hidden’ Weakness In Consumer Spending?“) I wrote of various indications that consumer spending may be (substantially) less than what is depicted by various mainstream indicators, including overall retail sales.

One recent development that appears to be problematical aspects in consumer spending is the performance of the consumer staples stocks.  As one can see in the chart below, there has been a marked relative weakness in these stocks (with the XLP serving as a proxy).  The chart shows a 10-year daily depiction of the XLP (top plot), the S&P500 (middle plot) and XLP:S&P500 ratio (bottom plot.)  While there can be various interpretations and reasons for this underperformance, it does appear to represent a “red flag” especially considering other problematical indications concerning consumer spending:

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

XLP chart

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The Yield Curve

Many people believe that the Yield Curve is a leading economic indicator for the United States economy.

On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”

While I continue to have the stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.

As an indication of the yield curve (i.e. a yield curve proxy), below is a weekly chart from January 1, 1990 through May 11, 2018.  The top two plots show the 10-Year Treasury and 2-Year Treasury yields.  The third plot shows the (yield) spread between the 10-Year Treasury and 2-Year Treasury, with the May 11, 2017 closing value of .43%.  The bottom plot shows the S&P500:

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

Yield Curve proxy

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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 3.9%.  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 Employment Population Ratio for those ages 25 – 54 years.  The Employment-Population Ratio is the Civilian Employed divided by the Civilian Noninstitutional Population.  Among disconcerting aspects of this measure is the long-term (most notably the post-2000) trend, especially given this demographic segment.

The current value as of the May 4, 2018 update (reflecting data through the April employment report) is 79.2%:

Employment Population Ratio: 25 - 54 years

Data Source:  U.S. Bureau of Labor Statistics, Employment Population Ratio: 25 – 54 years [LNS12300060], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 11, 2018:

https://fred.stlouisfed.org/series/LNS12300060

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U.S. Auto Sales

U.S. auto sales have experienced significant growth over the post-2009 period as seen in the chart shown below. The current reading (through April) is 17.069 million vehicles SAAR.  Of great economic importance is whether auto sales have peaked, which I believe has occurred, as well as other characteristics of the light vehicle market.  A long-term chart is shown below:

Light Weight Vehicle Sales: Autos and Light Trucks

source:  U.S. Bureau of Economic Analysis, Light Weight Vehicle Sales: Autos and Light Trucks [ALTSALES], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed April 10, 2017:

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

Here is the same measure on a “Percent Change From Year Ago” measure, with a current reading of .6% .  As one can see growth has been intermittent in nature since early 2016:

U.S. Light Vehicle Sales Percent Change From Year Ago

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Domestic Auto Production

Another notable measure is that of “Domestic Auto Production,” defined in FRED as:

Domestic auto production is defined as all autos assembled in the U.S.

Here is “Domestic Auto Production,” depicted below, through March 2018 with a last value of 260.0 thousand, last updated April 30, 2018:

Domestic Auto Production

source:  U.S. Bureau of Economic Analysis, Domestic Auto Production [DAUPSA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 11, 2018:

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

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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.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2727.72 as this post is written

Philadelphia Fed – 2nd Quarter 2018 Survey Of Professional Forecasters

The Philadelphia Fed 2nd Quarter 2018 Survey of Professional Forecasters was released on May 11, 2018.  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 2018:  2.8%

full-year 2019:  2.7%

full-year 2020:  1.9%

full-year 2021:  2.0%

Unemployment Rate: (annual average level)

for 2018: 3.9%

for 2019: 3.7%

for 2020: 3.9%

for 2021: 4.0%

–

Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 5.3%, 8.6%, 11.1%, 14.4% and 15.6% for each of the quarters from Q2 2018 through Q2 2019, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2027) 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 1.9% to 2.5% range.

_____

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 2726.31 as this post is written

The May 2018 Wall Street Journal Economic Forecast Survey

The May 2018 Wall Street Journal Economic Forecast Survey was published on May 10, 2018.  The headline is “Economists Think the Next U.S. Recession Could Begin in 2020.”

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.

An excerpt:

The economic expansion that began in mid-2009 and already ranks as the second-longest in American history most likely will end in 2020 as the Federal Reserve raises interest rates to cool off an overheating economy, according to forecasters surveyed by The Wall Street Journal.

Some 59% of private-sector economists surveyed in recent days said the expansion was most likely to end in 2020. An additional 22% selected 2021, and smaller camps predicted the next recession would arrive next year, in 2022 or at some unspecified later date.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 14.59%. The individual estimates, of those who responded, ranged from 0% to 32%.  For reference, the average response in April’s survey was 15.33%.

As stated in the article, the survey’s respondents were 60 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted May 4 – May 8, 2018.

–

The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  2.9%

full-year 2019:  2.4%

full-year 2020:  1.9%

Unemployment Rate:

December 2018: 3.7%

December 2019: 3.6%

December 2020: 3.9%

10-Year Treasury Yield:

December 2018: 3.24%

December 2019: 3.54%

December 2020: 3.59%

CPI:

December 2018:  2.4%

December 2019:  2.3%

December 2020:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2018: $66.80

for 12/31/2019: $65.07

for 12/31/2020: $63.42

(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 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 2723.07 as this post is written

Deflation Probabilities – May 10, 2018 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 2022.

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 May 10, 2018 update states the following:

The 2018–23 deflation probability was 3 percent on May 9, unchanged from May 2. The 2017–22 deflation probability was 2 percent on May 9, down from 3 percent on May 2. These deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2017 and early 2018, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2017 and April 2018 and the 10-year TIPS issued in July 2012 and July 2013.

_________

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 2723.07 as this post is written