Before the escalation of tensions between Ukraine and Russia in February, the stock market issue continued: Wall Street analysts were reviewing their 2022 and 2023 business earnings forecasts.
Since then, geopolitical risks have increased, becoming a major concern for investors. The stock market crashed, sending the S&P 500 (^ GSPC) below 4,114 on February 24.
Meanwhile, inflation data continued to ensure that prices rose at an alarming rate, prompting Federal Reserve Chairman Jerome Powell and his colleagues to demonstrate their determination to be more aggressive in tightening monetary policy.
Despite these storms, something amazing happened: Analysts continued to update their forecasts for higher wages.
According to FactSet, analysts expect the S&P 500 to gain $ 227.80 per share by 2022. This rate is 2% higher than the $ 223.43 expected from 31 December 2021.
Yes, the top review is modest. But it follows all the new troubles that have arisen since the beginning of the year.
The rest - not all - of this resilience can be explained by the revenue generated by energy producers, which has been strengthened by rising energy costs.
"A significant portion of the development comes from the energy sector (+ 2.0pp), and companies affected by high energy costs (-0.5pp) and those exposed to European (-0.2pp) have been struggling," said Binky Chadha, US equity official. strategist for Deutsche Bank, we wrote on Tuesday. "Despite the impact of these results, the full year estimates are still at + 0.8%.
So, what is happening here?
Easy: The economy continues to thrive, backed by severe storms.
Among other things, businesses and consumers have very healthy finances. Businesses continue to invest heavily in their operations. Consumers - despite doubts about inflation - continue to spend money on goods and services. Consumer finance is strengthened by $ 2.5 billion in overtime savings, allowing high-cost companies to maintain interest rates by raising prices.
Of course, we are talking about expectations for income. And this expectation will be reviewed as companies announce their quarterly results in the coming weeks. Remaining question: Will these expectations continue to be reviewed, or will they eventually begin to be reviewed?
