First quarter earnings season kicks off this week with several financial companies reporting results on April 12–13, and we are expecting another strong quarter of results. The S&P 500 Index has grown earnings at a double-digit clip three out of the past four quarters (as shown in today’s Chart of the Day below); could it make it four out of five?
LPL Chief Investment Strategist John Lynch noted, “Earnings should get a boost from the new tax law, on top of strong economic growth globally, robust U.S. manufacturing activity, and a weaker U.S. dollar. Gains are expected to be broad-based, with potential increases in all 11 S&P sectors.” Some key areas to watch include company announcements on planned uses of tax law proceeds, the impact of trade tensions on company outlooks, and potential wage pressures. In our latest Weekly Market Commentary, due out later today, we provide a detailed preview of the upcoming earnings season.
Though difficult to predict, robust growth in corporate profits may help stocks stabilize by shifting investor attention away from trade headlines and toward strong company fundamentals. Looking ahead, we maintain our 2018 S&P 500 earnings forecast of $152.50*, representing growth in the mid-teens. That strong earnings growth forecast supports our double-digit return expectation for the index in 2018, though those gains may come with some volatility.
*Based on our revised forecast from Outlook: 2018
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The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
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