GDP and Earnings Update
Submitted by Wespac Advisors, LLC on February 3rd, 2016- There have been several questions regarding the eventual accuracy of the Atlanta Fed’s GDPNow forecast; it is important to note that GDPNow is computed based on the same data as is used for the official GDP calculation — it is simply recalculated in real-time as data is received.
- GDPNow right before the first estimate of 4Q15 GDP was 0.7%; the first estimate was 0.7%.
- Based on additional data received, GDPNow suggests that the second estimate of GDP for 4Q15 will be 1.0%.
- GDPNow for 2Q16 is +1.2%, well below current consensus forecasts of +2.4%, and even farther below forecasts from a year ago.
- Standard and Poors, as of January 29th and 55% of the S&P 500 reporting, forecasts 4Q16 operating earnings to be $28.23/share or an 11% gain over 3Q15. Trailing 12-month PE ratios are now 18.18x operating earnings and 20.49x as reported earnings.
- If Standard and Poor’s 4Q15 forecasts are correct, 2015 earnings will be $105.61/share, down from the $137.19 forecast in the beginning of 2014 and down from the $130.99 forecast at the beginning of 2015. This will be the first year since the 2008 Crisis that operating earnings have fallen year-over-year.
- Standard and Poors is now forecasting $121.87/share operating earnings in 2016, down from their $134.75 forecast from one year ago.
- Earnings contribution by sector in 2015 were Information Technology (23.9%), Financials (20.13%), Healthcare (14.46%), Consumer Discretionary (12.51%), Industrials (10.85%), and Consumer Staples (9.63%).
- After putting a drag of (-5.23%) on earnings, Standard and Poors forecasts that Energy will contribute 2.54% to S&P 500 operating earnings. Prior to the melt down in oil prices, the Energy sector had typically comprised about 11% to S&P 500 operating earnings.
- Read more to see the Atlanta Fed GDPNow graph.
