CEOs of public companies aren’t worried about a weak economy right now and have instead been optimistic during the current earnings season. In fact, mentions of the term “economic slowdown” and related terms in sales, guidance, and earnings calls tracked by Bloomberg have fallen to their lowest level since 2007. In addition, articles referencing the term have dropped to the lowest level since June 2021.
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“The tone on outlook has improved, with most firms expecting further margin expansion and capital returns,” said Barclays strategists.
Elevated Earnings and Valuations
Wall Street had expected the S&P 500’s (SPX) earnings to grow by 7.4% this quarter, although the benchmark index is on track to nearly double that with 14.5% growth. Of the companies that have reported earnings, 81% have beaten estimates.
Meanwhile, the S&P 500 is trading at an elevated forward price-to-earnings (P/E) ratio of 23x, well above its 15-year average of 17x and approaching the 30-year peak of 24.4x set before the dot-com bubble.
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