Nice earnings forecasts you have. Shame if something happened to them: Joachim Klement
SPY•The S&P 500’s average annual earnings growth since 1992 was 9.5%, compared with analysts’ average forecast of 22.3%. The index’s long-term earnings growth forecast is now 16.7%, in the top 10% for this century, while its trailing P/E is 26.2, about 14% above its 10-year average.
1. Forecasts often miss
Since 1992, actual average annual S&P 500 earnings per share growth was 9.5%, while analysts forecast 22.3%. In months when S&P 500 earnings growth turned negative, the rolling 12-month rate averaged minus 4.5%, despite consensus estimates of 18.8% at the start of those periods.
2. Valuation measures diverge
The S&P 500’s 12-month forward P/E is 18.9, roughly in line with its 10-year average, but that valuation assumes earnings growth of 38.6% over the next 12 months. The 12-month trailing P/E is 26.2, about 14% above its 10-year average.
3. Long-term growth expectations
The long-term S&P 500 earnings growth forecast is 16.7%, placing it in the top 10% for this century. The author says the AI investment boom may end and forecasts a possible S&P 500 decline to 5,000 by the end of 2027, while warning that a bear market could arrive in 2028 instead. Nvidia, Advanced Micro Devices, Intel, Broadcom, Palantir and Micron are among constituents with particularly high long-term growth expectations.
