S&P 500 Earnings Surprise Points to Resilient Economy

90% of the companies in the S&P 500 that have reported their results have posted profit growth of 8.4% (average), which is higher than forecasted. 

Earnings posted better surprises than sales implying that prudent cost controls were implemented by management. Companies have been trying to do more with less and in banking term, it is known as “positive jaws”. While there has been some moderation, the economy is still resilient and consumer demand is poised to support earnings, implying continued top line growth.

We will remain invested for the current quarter but as we approach the Nov 2024 US Presidential election, investors might demand a higher market risk premium and coupled with a slightly elevated PE ratio (20x), a more conservative approach might be warranted.