An Earnings Bonanza - September 12, 2018
Q2 earnings season is wrapping up, and S&P 500 profits rose a very impressive 24.9% versus one year ago (Thomson Reuters).
80% of S&P 500 companies beat analyst estimates – a record.
Companies also posted strong sales growth.
Revenues rose 9.5% vs one year ago, the best reading since Q3 2011.
Sources of strength—
Strong U.S. economic growth
The cut in the corporate tax rate from 35% to 21%
Both offset a moderation in economic growth outside the U.S.
The strong numbers have supported stocks.
Earnings growth for the remainder of the year is forecast to top 20% before slowing in 2019 per Thomson Reuters.
Forecasts into 2019 come with greater uncertainty and are dependent on the economy.
Many variables may create temporary tailwinds or headwinds for stocks. The biggest medium- and long-term driver of stock prices is—
the forecast for profits, and
whether companies exceed or miss profit forecasts.
Long-term investors look past short-term bumps in the road and subscribe to a long-term approach as the most efficient way of accumulating wealth.