Analysts put an end to the longest streak of upward revisions to U.S. earnings forecasts in five years
Inflation and rising interest rates are forcing experts to revise their expectations
Stock market analysts have put an end to the longest streak of upward revisions to U.S. corporate earnings forecasts in the past five years. Photo: Andrea Izzotti / Shutterstock
Stock market analysts have put an end to the longest streak of upward revisions to U.S. corporate earnings forecasts in the past five years, Bloomberg reports, citing data from the Citigroup index. This reflects market concerns about how rising inflation and high interest rates will affect corporate earnings.
Details
For the first time in 23 weeks, the number of analysts who lowered their earnings estimates exceeded the number who raised them, according to Bloomberg. This marked the end of the longest streak of upward revisions since September 2021.
“The main sources of weakness stem from the consumer sector (both essential goods and discretionary spending), as well as the commodities and financial sectors,” said Stefan Kemper, Chief Investment Officer at BNP Paribas Wealth Management Germany. “I believe these revisions can be directly linked to a combination of rising living costs and higher energy prices.”
Context
Although Wall Street analysts generally expect U.S. corporations to post a record year in terms of earnings, some experts are concerned about the stock market's immediate future, Bloomberg adds.
Earlier this week, Morgan Stanley strategist Michael Wilson warned that the S&P 500 index risks falling 7% if the recent decline in stock valuations continues, and further increases in energy prices trigger a tightening of monetary policy. He noted that, although strong corporate earnings have so far helped stock prices withstand rising bond yields, valuations of S&P 500 companies have fallen over the past four months to their lowest level since March.
Other market strategists, including those from JPMorgan Chase and Goldman Sachs, also said that the stock market should continue to be supported by strong corporate earnings, according to Bloomberg. However, analysts at Bank of America warned that investor positioning remains too optimistic amid slowing earnings growth.
This article was AI-translated and verified by a human editor
