A number of major investors expect to see some positive changes in the US companies’ profits. Although, Wall Street gets ready for the possible decline in earnings for the first time in three years.
Analysts believe, the financial markets are likely to become more volatile in the nearest future. Their long-term forecasts do not sound optimistic amid concerns raised by the weakness of the US economy as well as lack of progress in the US-China trade negotiations.
Moreover, an unexpected decrease in the industrial production in March also affected outlook for the US economy. Another wave of fears in the market was triggered by an inversion of yield spread between the three-month and the ten-year government bonds. Notably, the previous inversion was recorded in 2007. Experts consider the current inversion to be an indicator of the forthcoming recession.
A lot of investors are worried about a possible slump in profits of the major companies included in the S&P 500. The revised outlooks for earnings in 2019 became another reason for such fears. Analysts anticipate earnings to drop by 1.7% in the first quarter and to be slightly increasing during the rest of 2019.
Specialists think that the growth of companies’ earnings may slow down in the current year compared with 2018 when it advanced by about 24% due to lower corporate tax.
The outlook for the earnings growth in the second quarter was downgraded to 3.0% from 6.4%, in the third quarter – to 2.7% from 4.9%. The forecast for the fourth quarter also slightly worsened, yet it remained at 9.1%.
According to experts, these readings might get another downward revision, while the outlook for the first quarter is likely to advance. In this case, the S&P 500 companies will finish the year at a profit.
