An Upbeat Earnings Indicator

Why has the stock market been holding up so well so far this year despite lots of pessimism about an impending recession? One possible explanation is that industry analysts are turning more optimistic on the earnings prospects of the companies they follow. We have been tracking the percent of S&P 500 companies with positive three-month percent changes in analysts' consensus forward earnings (chart). (FYI: “Forward” earnings is the time-weighted average of analysts’ consensus estimates for the current and following years.)

The data series is weekly and starts in 1998. It tends tend to fluctuate around 80% during economic expansions. It drops toward 50% and lower during recessions. So far, it seem to have bottomed around 50% at the end of last year without an actual recession transpiring. As of the April 21 week, the forward earnings series was at 61.6%.