Goldman cuts S&P 500 earnings growth forecast to 0pc

Anticipating a larger contraction in US corporate profit margins has led Goldman Sachs’ equity strategist David Kostin to slash his 2023 S“Following a weak third-quarter earnings season in which SP 500 net margins declined year/year for the first time since the pandemic, we lower our EPS forecasts for 2022 , 2023 and 2024 ,” Kostin said in his weekly kickstart note.“The revised estimates reflect annual growth of 7 per cent, 0 per cent, and 5 per cent, respectively.

“A deeper or more prolonged recession poses downside risk to our recession scenario EPS. Revisions to bottom-up 2023 EPS estimates have been particularly sharp this year, but we see room for further cuts.”According to FactSet, analysts expect a decline in earnings of negative 1.0 per cent for fourth quarter 2022 but earnings growth of 5.6 per cent for calendar year 2022. For first quarter 2023 and second quarter 2023, analysts are projecting earnings growth of 2.3 per cent and 1.5 per cent.

Pies said “if we assume 2023 sales estimates and a simple reversion of margins to pre-COVID levels, then SConventional wisdom argues that with the days of cheap energy and money behind us, an economy-wide margin compression is at hand, Pies also said, adding that: “Historically, though, the sectors that expanded margins the most in the run-up to the peak suffer the greatest in any subsequent contraction.

While the narrative floating around is that low rates and cheap energy allowed all companies—across all sectors—to boost margins to levels that will prove unsustainable under the new macro regime, Pies said the sector-level data does not support this conclusion. “Rather, the growth of high-margin tech companies’ weight within the SPies said investors should hold to the sidelines. “We believe CPI will decelerate rapidly in 2023, but substantial improvement is not likely until early 2023.

writes on monetary policy, equities, commodities and currencies. He is the overnight markets editor and writes Before the Bell.

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