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Big Dispersion In YTD S&P 500 Sector Returns? S&P 500 Forward Estimate Continues March Higher

Brian Gilmartin, CFA profile picture
Brian Gilmartin, CFA

Longtime readers that pay attention to S&P 500 earnings know that the typical pattern for the "forward 4-qtr estimate" is that its high print usually occurs the first week of every quarter as the trailing quarter falls off and the next 4 quarters ahead get summed to create the new estimate.

After the new quarter starts and the high print occurs, the forward estimate usually starts to decline as sell-side pessimism and the natural conservatism of "estimate creation" results in downward pressure on quarterly sector estimates until actual earnings are seen.

What is amazing is that for 16 straight weeks, the "forward 4-quarter estimate" has increased sequentially, unprecedented since the spring of 2009 when the post-2008 Financial Crisis market lows were hit.

Since November 17, 2017, through this weekend of March 2, 2018, the forward 4-quarter estimate has increased every week from $142.30 to this week's $152.81.

The fact too is that the week from Nov. 10, '17, to Nov. 17, '17, saw just a $0.09 decline in the "forward 4-quarter estimate" from $142.39 to $142.30, so if we excluded a few weeks of small declines, the "streak" looks a lot longer.

This is a remarkable run for positive S&P 500 forward estimate revisions.

Thomson Reuters data (by the numbers):

  • Fwd 4-qtr est: $158.21
  • P.E ratio: 17.0x
  • PEG ratio: 0.83x
  • SP 500 earnings yield: +5.88%
  • Year-over-year growth of fwd estimate: +20.57% vs. last week's +20.27%

(Source: Thomson Reuters "This Week in Earnings")

What might be even more interesting to me is that when the correction started or the S&P 500 hit its peak on January 26th, the 10-year Treasury yield closed the week at 2.66%. So even with the nasty stock market correction and the very rapid 10-11% drop for the key benchmark, the 10-year Treasury yield has managed to rise to Friday's

This article was written by

Brian Gilmartin, CFA profile picture
Brian Gilmartin, is a portfolio manager at Trinity Asset Management, a firm he founded in May, 1995, catering to individual investors and institutions that werent getting the attention and service deserved, from larger firms. Brian started in the business as a fixed-income / credit analyst, with a Chicago broker-dealer, and then worked at Stein Roe & Farnham in Chicago, from 1992 - 1995, before striking out on his own and managing equity and balanced accounts for clients. Brian has a BSBA (Finance) from Xavier University, Cincinnati, Ohio, (1982) and an MBA (Finance) from Loyola University, Chicago, January, 1985. The CFA was awarded in 1994. Brian has been fortunate enough to write for the TheStreet.com from 2000 to 2012, and then the WallStreet AllStars from August 2011, to Spring, 2012. Brian also wrote for Minyanville.com, and has been quoted in numerous publications including the Wall Street Journal.

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Comments (4)

Great Articule.
AndrewXnn profile picture
Good point about the 10 year rising as Equities sold off...

Noticed that M2 rose between 1/29 to 2/5, but has fallen since then (at least thru 2/19, which is the last week of data available from the FED).

Short interest on the ICE BofAML US High Yield however, has hit a record high (a few weeks ago) as reported by Bloomberg:


While tempting to declare that that is where the "Smart" money has gone, it also looks to be a lucrative area for a short squeeze.

Meanwhile, I will continue to stick with VOO as core holding. Understand forward earnings yield of 5.8% are the highest they have been since about November 2016 briefly or Jan-March 2016 for extended period.
Interesting article, esp. as one reflects on what's ahead next week, and lessons learned from last and recent previous weeks.

I assume media stocks like DIS, CMCSA, FoxA, etc are neither in tech or in telco, but I wonder how they performed YTD.

I assume biotech is exclusively in healthcare, in which case, I feel it does beg for a separate category. I keep tempted to dive into both large cap pharma as well as biotech, as I feel FDA will rush some key approvals during 2018, but it'd be useful to know how far they are behind tech in YTD '18?
Comfortably Numb profile picture
Nice article. Thanks.
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