Economic Blog
Thursday, May 13, 2021
A truly record-breaking earnings season is wrapping up and this week in the LPL Market Signals podcast Ryan Detrick and Jeff Buchbinder discuss just how incredible it really was. They also tackle if we’ve hit a peak in earnings and economic growth, while also playing a fun game of who’s telling the truth.
Earnings Review
At the start of earning season, S&P 500 Index earnings were expected to be up 24.5% and Jeff said above 30% was likely. Well, well, well, did corporate American ever top that! With nearly 90% of S&P 500 companies having reported, first quarter earnings are tracking to a remarkable 49% year-over-year increase, more than double the increase as of March 31. Jeff also pointed out that S&P 500 revenue is on track to grow 10% year-over-year, four percentage points above the March 31 estimate and the most upside FactSet has ever recorded. LPL Research as a result of the strong earnings season upped our 2021 forecast for S&P 500 earnings to $187.50–$190 per share, up more than $10 from our prior estimate. Ryan didn’t offer much to this conversation, as he is simply out of superlatives to describe how great this earnings season really was, but continues to impress us with the a joke that may top the talking dog jokes, provided by his son.
Peak Everything?
For the economy, it’s tougher to grow when the bar is raised. Manufacturing ISM data and services ISM data both missed the mark last week, suggesting we may have hit the cycle high. Given the economy has been growing for about a year, Ryan noted this is perfectly normal for the easy part of growth to peak about now, but that doesn’t mean a recession is around the corner. We haven’t recovered the jobs yet, still about 8 million to go, and you tend to see many more years of growth after growth peaks. Jeff pointed out that earnings growth likely didn’t peak yet, but we’ll probably see that in the second quarter.
Who is Telling the Truth?
A few things happened last week that have many investors scratching their heads. For starters, April nonfarm payrolls came in way lower than expected. Jeff noted that this likely isn’t a new trend of weak employment, but probably more a one off event. Ryan discussed how Janet Yellen maybe was a little too honest, as she said higher rates might need to happen to slow down economic growth. She backtracked after the fact, but the cat is out of the bag, this is another sign that maybe behind closed doors the thinking is rates will need to be hiked in 2022. Lastly, Jeff discussed President Biden’s concession that he is willing to work with Republicans and his target of a 28% corporate tax rate will likely come in closer to 25%. This is exactly what we’ve been saying for months now.
Tune In Now
Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunes, Google Podcasts, or Spotify and find us on the LPL Research YouTube channel.
You can watch the full video below and directly on our YouTube channel. Please be sure to subscribe to the LPL Research YouTube channel so you don’t miss anything! Also, if you like our channel, please give us a positive review—it helps more than you know!
IMPORTANT DISCLOSURES
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data from FactSet and MarketWatch.
This Research material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use – Tracking # 1-05144093