2024-01-22 15:27:52 ET
Summary
- Q4 2023 earnings for S&P 500 components are coming in weak, with earnings estimated to be down about 1.7% YoY and profit margins decreasing.
- The financial and energy sectors are major contributors to the weakness in earnings.
- Tech sector profit margins are not as strong as expected either, challenging the narrative of an AI-driven earnings boom.
- After analysts predicted a 2024 earnings boom, the rubber meets the road.
Markets do crazy things sometimes, and it's not uncommon for stocks to rally 10-20% in short periods based on pure sentiment. The reverse can also happen, like in 2022, when the Fed pivot optimism was crushed and stocks tumbled 20% in a matter of weeks from August to October. Historically, we know that Fed pauses tend to see wild and short rallies, followed by a brutal reversal to the final lows. If you're buying for value, what you should care about is the underlying businesses– how much you're paying, how much they're earning, and what the growth prospects are. S&P 500 ( SPY ) components have started to report earnings for Q4 2023, and the results are surprising when contrasted with the stock market returns. So far, earnings and profit margins are rather weak, challenging the narrative that ChatGPT and the Fed cannot be stopped and P/E ratios no longer matter....
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For further details see:
No One Is Talking About This? Earnings Are Cooling Amidst Fed Pivot Euphoria