July 25, 2023

 

As we noted last week, we are in the second quarter earnings reporting season. So far, according to FactSet, 18% of S&P 500 Index companies have reported. While the majority are reporting positive revenue and earnings surprises. But before becoming too ebullient, please keep in mind these surprises are coming in after expectations have been reduced.

Here is a picture of expected earnings for the S&P 500 Index in dark blue against the Index in light blue (also from Factset). I think almost anyone would say if future earnings play out as depicted in the dark blue line as analysts currently expect, it will be an absolutely terrific outcome and, indeed, a soft landing. This is why the market is up.

Still, with rates up, we think it is prudent to lower expectations and not declare a soft landing until we clear 2023. Until that time, exercising some prudence, not overpaying for hype stocks, and maintaining a well-balanced portfolio with a variety of quality dividend growth stocks makes abundant sense.

 

 

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