Wall Street analysts continue significantly lowering the earnings bar as we enter the Q2 reporting period. Even as analysts lower that earnings bar, stocks have rallied sharply over the last few months.Wall Street estimates. Of course, the high beat rate is always the case due to the sharp downward revisions in analysts’ estimates as the reporting period begins. The chart below shows the changes for the Q2 earnings period from when analysts provided their first estimates in March 2023.
However, even with the earnings bar lowered going forward, earnings estimates remain detached from the long-term growth trend. That close relationship in growth rates is logical, given the significant role that consumer spending has in the GDP equation.Such is because corporate earnings are a function of consumptive spending, corporate investments, imports, and exports.Given current economic assessments from Wall Street to the Federal Reserve, strong growth rates are unlikely. The data also suggest a reversion to the mean is entirely possible.