Estimates for Q2 earnings growth is 20% – about the highest level in the last seven years. For comparison, earnings rose only 11% in 2017.
Robust corporate profits signal economic strength. Whether they also portend higher stock prices is debatable.
Expectations play a big role.
For example, although earnings were up 11% last year, the market was up more than 20%. Returns were exceptional in part because of earnings expectations.
As it stands now, analysts suggest this level of earnings growth is hard to maintain and predict lower growth next year.
Weekly Update through July 13, 2018 The S&P 500 added 1.55%, even as the Dow Jones gained 2.32%, the Russell 2000 declined 40bps the Nasdaq added 1.79%
As for US bonds, they added 18bps.
Globally, the MSCI World Index gained 1.02% and the Barclays Global Aggregate Bond Index lost -43bps.
The Euro Stoxx 50 gained 22bps in local-currency (Euro) and declined -39bps in USD. Meanwhile, the Topix added 2.28% local-currency (Yen) and 49bps in USD.
