Fourth Quarter's Earnings Reporting Season Begins

The new year is about to begin with an earnings reporting season for the last quarter of the old year. We've been optimistic on the outlook for earnings because we expected the economy to remain resilient and grow despite the Fed's aggressive tightening of monetary policy over the past two years. So we were pleased to see that S&P 500 operating earnings per share rose to a new record high during Q3-2023 (chart). There was a short and shallow earnings recession that lasted three quarters from Q2-2022 through Q1-2023. Earnings fell just 7.3%.

The relatively short bear market in stocks last year correctly anticipated the relatively short and shallow recession in earnings. Now the market is anticipating that earnings will continue to grow this year (chart). We agree with this assessment and project new record highs for earnings this year. There could be a downtick in the Q4-2023 result as a result of the auto strike during October.