Lengthy-time readers know that Bespoke’s analysis is one among my high picks for “value-added” work, and this weekend’s Bespoke Report was no exception.
From web page 12 of this weekend’s Bespoke Report printed Friday, March 11, 2022:
S&P 500 Longest Drawdowns
Learn the third sentence of the second bullet level. ( Web page 11 and 12 might be cut-and-pasted right here however readers ought to attain out to Paul Hickey at paulhickey@bespokeinvest.com or justin@bespokeinvest.com to get the Report. Bespoke is excellent analysis at an inexpensive value. )
In truth the earnings revisions this week had been principally optimistic and proceed larger:
- The ahead 4-quarter estimate rose to $225.46 from final weeks from final weeks $225.60 and 12/31/21 ahead estimate of $216.14;
- The PE after the two.44% decline within the S&P 500 this week is eighteen.5x
- The S&P 500 “earnings yield” jumped to five.39% this week, anticipated given the benchmark drop, from 5.21% final week;
- Perhaps much more fascinating: test “anticipated” S&P 500 EPS progress charges for 2022:
(Amazon (NASDAQ:) and Tesla (NASDAQ:)) and (Meta Platforms (NASDAQ:)) have seen sharp downward revisions whereas , and have seen regular optimistic revisions larger of their anticipated EPS progress charges for full-year 2022.
The purpose: regardless of the drop this in week within the S&P 500, precise EPS revisions had been optimistic and principally larger.
Once more, the caveat being that given how badly “consensus” missed with their post-pandemic earnings estimates, readers needs to be cautious about the identical factor taking place to the draw back beginning with Q1 ’22 earnings in a couple of month. (This website listed the upside surprises or EPS beat charges for the S&P 500 .)
Abstract / conclusion: Regardless of the market’s issues, they don’t seem to be “earnings associated” but. All this implies to readers with with an extended time horizon is that the market is giving you a chance to purchase high quality companies at decrease valuations.
That’s a great factor.
The query is how dangerous does the draw back get on the S&P 500?
Studying some technicians, a 1/third retrace of the S&P 500 rally from the pandemic lows in late March ’20 to the early ’22 S&P 500 highs, will get us to the three,800 space for the S&P 500 or roughly 10% decrease from Friday’s shut.
There are such a lot of headwinds and cross-currents in the present day: final week, Chinese language shares traded within the US received completely whacked presumably on the SEC’s potential enforcement of the HFCAA (Holding Overseas Firms Accountable Act), after which US shares which have a major Chinese language presence began to take fuel when it grew to become obvious that China might retaliate if the SEC (as is their proper) began inspecting their monetary audits for the final 3 years. (Right here’s the CNN article on that motion final week.)
The KraneShares CSI China Web ETF (NYSE:) fell 49.99% in calendar 2021 and is down one other 38% YTD in 2022 as of Friday, March eleventh.
Ukraine has set off an entire vary of resolution timber given China’s public help of Russia and Putin and what all of it finally means.
After which to high all of it off, you might have the Fed within the background, quickly to be within the foreground this week with a 25 bp fed funds charge enhance, and Wall Road determining what all of it means, which most likely interprets to “cut back inventory publicity.”
What’s taking place within the US bond market deserves a separate publish.
S&P 500 EPS revisions and traits are nonetheless wholesome. And as Bespoke famous, with this yr being the “worst a number of compression” since 1990, one thing should give quickly.
Take every thing right here with a grain of salt and substantial skepticism. Occasions can change rapidly within the capital markets and develop into far worse than you observed or develop into a lot better far quicker than you’d anticipate.
