JPMorgan is claiming that earnings forecasts for the SP500 this year are ‘too optimistic’

S&P 500 earnings per share (EPS) are expected to increase by 17% between Q1 and Q4 of this year, according to analyst predictions. This implies that S&P 500 businesses must have "extremely high topline growth or a very strong expansion in profit margins," according to JPMorgan.

"We have doubts about both," the strategists continued.

According to their estimates, a 17% rise in S&P 500 revenue would need to coincide with a 13% nominal GDP growth in the United States. Furthermore, they noted that there is "little room for further expansion" given the historically high S&P 500 EPS-to-Sales Per Share ratio now in place.

As a matter of fact, JPMorgan said that, in contrast to the optimistic high double-digit growth predictions that are anticipated for this year, both S&P 500 sales and profits growth are converging towards a mid-single-digit pace or around 5%.

JPMorgan strategists feel that the Q1 reporting season hasn't been all that great, even if the S&P 500 businesses' Q1 2024 EPS beat analysts' initial projections by 9%.

On a whole, JPMorgan stated that it continues to take a cautious stance towards stocks and is hesitant to chase the post-FOMC surge.

Their cautious approach stems from their belief that equities markets would be under pressure from an extended period of high interest rates, which might heighten worries about a possible harsh landing.

The analysts stated, "We do not believe that the first-quarter inflation surprises are totally noise and the balance of risks is skewed towards persistent services inflation."

(Sources: investing.com, reuters.com)