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Mark O' Donnell
 · 
Research Analyst
October 19, 2022
 · 

Will earnings season push S&P to new lows?

  • A Bloomberg survey showed that more than 60% of investors believed the 3Q earnings season will push the S&P 500 lower
  • But data from FactSet is painting a different picture, revealing analysts' expectation of a roughly 7.5% growth in the earnings for S&P 500 companies for this year and the next

With the latest US earnings season underway, plenty of investors are still wary of making investment decisions. They hope that the earnings results will serve as guidance as to how the next few months will look like before factoring in fresh monetary policies and inflationary measures. 

Earnings and the S&P 500 

In the lead up to the earnings season, A Bloomberg survey showed that more than 60% of its 724 respondents believed the third-quarter earnings season will push the S&P 500 index lower. 

But data from American financial data and software company FactSet is painting a different picture, revealing analysts' expectation of a roughly 7.5% growth in the earnings for S&P 500 companies for this year and the next, despite investors' fear of a worsening economic downturn. 

President of Yardeni Research Ed Yardeni expects the S&P 500 to wait until the end of 2023 to be back at its peak, while other analysts are betting on an improving outlook that will push stock prices higher, the New York Times reported

S&P 500, with YTD% Return Indicator 

Federal Rate decision 

While investors are seeking clarity from the third-quarter earnings season, industry players and analysts are united in the belief that the Federal Reserve's rate decision will likely override any positive momentum and have major impact to stock performance moving forward. 

JPMorgan CEO Jamie Dimon said depending on whether the Federal Reserve engineers a soft or hard landing for the economy, the S&P 500 could fall another 20%. It came with a warning on Monday that the US would likely fall into a recession over the next six to nine months. In contrast, the International Monetary Fund, said Tuesday that it expects the US economy to grow 1%. 

The price of goods and services in the US continued to grow in September, with the consumer price index 8.2% higher than the prior-year period. The Federal Reserve and some economists maintain that demand generated by a hot labor market and higher wages fuel inflation and that higher unemployment and interest rates are the solution to bring it down. 

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