Long-Term S&P 500 Earnings Trends Along With Market Returns

2025-03-17 20:10:00 ET

Summary

• Over the years, one data point I’ve noticed is that many S&P 500 valuation models use a long-run S&P 500 EPS growth metric of 7% to estimate fair value on the benchmark.
• If you look at S&P 500 returns over these longer time periods, you’ll see the return on the S&P 500 benchmark, roughly mirrors the longer-term growth (or decline) of S&P 500 earnings.
• The last 4 quarters or basically 2024 have seen tech grow faster than “average” through the first two quarters of ’24, and then slower than average through the last two quarters of ’24.
• Financial sector EPS growth was even stronger than the tech sector’s growth. From Q4 ’11 through Q4 ’23, the financial sector averaged +15.8% y-o-y growth.

Over the years, one data point I’ve noticed is that many S&P 500 valuation models use a long-run S&P 500 EPS growth metric of 7% to estimate fair value on the benchmark....

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