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S&P 500 Index Earnings And Revenue Growth Rate Projections

 View from the Observation Deck  

  1. On 5/14/18, the S&P 500 Index closed the trading session at 2,730.13, 4.97% below its all-time high of 2,872.87 set on 1/26/18, according to Bloomberg. 
  2. For the market to trend higher, we believe that corporate earnings will need to grow, and perhaps the best catalyst for growing earnings is to increase revenues.
  3. From 1926-2017 (92 years), the S&P 500 Index posted an average annual total return of 10.2%, according to Ibbotson & Associates/Morningstar. 
  4. As indicated in the table, Bloomberg's 2018 and 2019 consensus year-over-year (y-o-y) earnings growth rate estimates for the index were 22.1% and 10.7%, respectively, as of 5/11/18. 
  5. Nine of the 11 major sectors that comprise the index reflect double-digit y-o-y earnings growth rate estimates for 2018, compared to five for 2019. 
  6. Bloomberg's 2018 and 2019 consensus y-o-y revenue growth rate estimates for the index were 7.7% and 4.9%, respectively, as of 5/11/18.
  7. Seven of the 11 major sectors reflect y-o-y revenue growth rate estimates of 5.0% or more for 2018, compared to six for 2019. 
  8. Overall, the forecast for earnings and revenue growth is encouraging, in our opinion. 

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks (currently 505) used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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Latest Market News

 Stocks fell for the week as investors grappled with higher bond yields, political risks around the globe, trade tensions and higher energy prices. The real estate and utilities sectors, which tend to be bond proxies due to their high dividend yields, lost over 2% for the week. By contrast, the materials and energy sectors posted the biggest gains as investors are starting to price in higher inflation expectations. In economic news, retail sales rose 0.3% in April, in-line with forecasts, as higher paychecks from tax-cuts offset rising fuel costs. In stock news, both Walmart Inc.

 Treasury prices dropped moderately over the course of the week on strong economic data and speculation that both the Federal Reserve and European Central Bank may raise interest rates more quickly than previously expected. On Tuesday, April Advance Retail Sales were solid while March sales figures were revised to 0.8%, and May Empire Manufacturing was higher than expected, causing a risk-on environment which led to a significant drop in Treasury prices. It was also reported on Tuesday that the U.S.

 View from the Observation Deck  

Securities offered through Harbour Investments, Inc.,
member FINRA/SIPC. http://www.finra.org/
http://www.sipc.org/about-sipc

Investment Advisory Services offered through
Compass Financial Advisors, LLC,
a registered Advisor. 
Compass Financial Advisors, LLC &
Harbour Investments, Inc.
are separate entities.

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