This one metric is holding steady

Senior Analyst

Marketing Brew

Despite the recent flurry of troubling headlines about the economy and the markets, one key metric has been very stable and healthy. Expected Earnings. The chart below comes from FactSet's John Butters. It shows how analysts' expectations for the S&P 500's 2022 and 2023 earnings per share (EPS) have evolved over the past year through last Friday.

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One thing is clear, earnings expectations are holding up. More importantly, there haven't been any notable downward revisions, even after analysts have had time to consider the implications of things like Omicron-related disruptions, labor shortages, supply chain issues, inflation, and tighter monetary policy. This is good news for long-term investors: Few things are more important for stocks than earnings and the outlook for earnings. "Higher EPS revisions were a driver of last year's strong equity returns, in our view," Christopher Harvey, head of equity strategy at Wells Fargo, wrote on Monday. "We are carefully monitoring this figure as earnings outlook and expectations should continue to be a leading indicator. " As you probably witnessed, one of the few things rising faster than stock prices in 2021 was expectations for earnings. The bottom line is that despite the flurry of unsettling news you might've read in recent weeks, the prospect for earnings has been stable. And as we've seen today, earnings are one of the most important drivers of stock prices. As Earnings reports continue to roll in this week, keep an eye on the earnings per share. The results so far have got me bullish.

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