Things Are Looking Up


Eighty percent of S&P 500 Index companies have now reported earnings for the third quarter and things are looking constructive from a corporate earnings perspective. According to FactSet, earnings are up year over year for the first time since 3rd quarter 2022—by over 3%. The stock market this week reflected this rosy earnings report, having its best week of 2023 after notching a three-month price correction. Here’s what stocks did last week:



An important observation from last week’s returns cannot be overlooked. Market breadth was VERY GOOD last week as evidenced by the S&P 500 Index and the equally weighted S&P 500 Index posting nearly identical returns. This is a BIG departure from the YTD experience where the cap weighted index rose while the equal weighted index was flat. So, it was not just the top ten biggest stocks last week but instead a broader level of stock participation in the rally. Could this be the beginning of a broadening market and a rally in which most stocks participate? That is a vital question to be closely watched for continuation over the coming weeks.

As we close out the year 2023 and move toward 2024, the bottom-up consensus earnings expectations are for over ten percent earnings growth next year. It seems quite unlikely that we will see this magnitude of earnings growth for 2024 because, typically, estimates come down consistently over the course of almost all years, even during growth years. Nonetheless, it is not a stretch to say that even if earnings estimates decline some, the growth should propel the market higher over the next twelve months. The only caveat would be if the economy tips into a full-brown recession.

At this stage, we can see some cracks developing in consumer credit and the real estate lending markets, but we cannot say whether these things will develop into recession. On the constructive side of the ledger, we have robust GDP growth, continuing consumer confidence, and consumer spending holding up. Thus, at this stage we are inclined to say we are more positive in our outlook than negative. We think the process of onshoring manufacturing back to the United States may end up being a multi-year tail wind to support GDP growth and corporate earnings growth. We will be monitoring this dynamic closely over the coming weeks and months.



The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The S&P 500 index is regarded as one of the best gauges of prominent American equities’ performance, and by extension, that of the stock market overall.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market. The composition of the NASDAQ Composite is heavily weighted towards information technology companies.

The NASDAQ-100, whose components are a subset of the NASDAQ Composite’s, accounts for over 90% of the NASDAQ Composite’s movement, and there are many ETFs tracking its performance.

The Dow Jones Industrial Average, or simply the Dow, is a stock market index that indicates the value of 30 large, publicly owned companies based in the United States, and how they have traded in the stock market during various periods of time. These 30 companies are also included in the S&P 500 Index. The value of the Dow is not a weighted arithmetic mean and does not represent its component companies’ market capitalization, but rather the sum of the price of one share of stock for each component company. The sum is corrected by a factor which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index.

The Bloomberg US Aggregate Bond Index (^BBUSATR) is used as a benchmark for investment grade bonds within the United States. This index is important as a benchmark for someone wanting to track their fixed income asset allocation.

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