American companies reportedly are expected to post their strongest quarterly earnings in years.
Analysts expect earnings for S&P 500 companies to grow by 9.1% overall in the first quarter from a year earlier, as of March 31, which would mark the highest growth since the fourth quarter of 2011, the Wall Street Journal quoted FactSet.
“Still, analysts have trimmed their profit expectations since the start of the year, and disappointing results could stoke concerns that stock-price gains have outpaced earnings growth,” WSJ.com explained.
“Investors have been betting that U.S. corporate profits will soar this year, supercharged by a Trump agenda that includes tax cuts and looser regulations. Last month’s collapse of the Republican health-care bill cast doubt on such policies, but a strong earnings season could give investors a reason to keep investing in stocks,” the Journal explained.
The S&P 500 is up 10% since Election Day, while the Dow Jones Industrial Average has risen 13% over the same period, the Journal reported. Companies in the S&P 500 traded at an average of 21.7 times their past 12 months of earnings, above their 10-year average of 16.5 times trailing earnings, according to FactSet.
“The fundamentals just don’t support valuations where we’re at,” Art Hogan, chief market strategist at Wunderlich Securities, told the Journal.
“Some of what was baked in there was that we’d get corporate tax cuts and deregulation boosting earnings.”
Many investors are skeptical President Donald Trump is close to pushing through a corporate-tax-cut package, the Journal explained.
“The minute you begin to worry about policies going through, you have to start worrying about the basics again,” Nicholas Colas, chief market strategist at brokerage Convergex, told the Journal.
Other respected economic voices also have urged caution when it comes to the future of the recent bull stock market.
University of Maryland economist Peter Morici tells Newsmax TV that the stock market can easily tumble as investors’ honeymoon with Donald Trump’s presidential campaign rhetoric comes to a sudden end.
“Investors can easily become disappointed and skeptical about today's valuations, the market could take a dive, and that in turn could create an environment of pessimism that ripples through the economy,” he told "America Talks Live."
“Already consumers are not spending. Look at car sales, look at retail sales generally. They're not happening,” Morici explained to Miranda Kahn.
“People are starting to get cautious, they're starting to get skeptical. It's not that the people that voted for Trump don't believe in Trump or don't believe in what he has to say and wants to do, but let's face it, the Freedom Caucus, if it doesn't get its way, doesn't get its way,” the Newsmax Finance Insider said.
“And with that in mind, we have a situation where with narrow majorities in the House and Senate, the Democrats considering Trump basically illegitimate. We can disagree about it, but that's the way they behave," Morici said.
"It's very, very hard to get anything done. Historically, Republican presidents have governed from the center. That's been part of the problem. That's why the Freedom Caucus is upset. But governing from the center requires them to make friends with some Democrats. Who on the Democratic side are willing to make friends with Donald Trump? Not many,” he said.
© 2023 Newsmax Finance. All rights reserved.