Market Briefing: S&P Forward Earnings & the Economy January, 18 Dr. Edward Yardeni 516-972-7683 eyardeni@ Joe Abbott 732-497-56 jabbott@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents S&P Earnings Squiggles 3 S&P Forward & Operating Earnings 4 Forward Earnings & World Exports 5 Forward Earnings & OECD Production 6 Forward Earnings & US Leading Indicators 7 Forward Earnings & US Coincident Indicators 8 Forward Earnings & US Business Sales 9 Forward Earnings & Production Forward Earnings & Employment 11 Forward Earnings, Orders & Shipments 12 Forward Earnings & Capital Spending 13-14 Forward Earnings & US Exports 15 Forward Earnings & ISM 16 Forward Earnings, Jobless Claims, & Spot Prices 17 Forward Earnings & Trade Weighted Dollar 18 January, 18 / S&P Forward Earnings & the Economy www.
16 1 14 1 1 1 9 8 Figure 1. S&P OPERATING EARNINGS PER SHARE (Thomson Reuters data) (consensus analysts estimates in dollars, monthly, ratio scale) Analysts Estimates Annual* S&P Earnings Squiggles 12-month forward** Actual 4Q sum*** 6 7 8 9 11 12 13 14 15 16 17 18 Dec Q3 16 1 14 1 1 1 9 8 7 6 97 98 99 1 2 3 4 5 7 6 4 95 96 4 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 * "Squiggles" span 25 months from February to February. ** Time-weighted average of consensus operating earnings estimates for current and next years. *** Actual 4Q sum from Thomson Reuters I/B/E/S. Source: Thomson Reuters I/B/E/S. 45 4 Figure 2. S&P OPERATING EARNINGS PER SHARE (Thomson Reuters data) (consensus analysts estimates in dollars, monthly, ratio scale) 45 4 35 25 82 83 Analysts Estimates Annual* 12-month forward** Actual 4Q sum*** 84 85 86 87 88 89 9 91 92 93 94 95 35 25 81 15 8 15 1979 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 * "Squiggles" span 25 months from February to February. ** Time-weighted average of consensus operating earnings estimates for current and next years. *** Actual 4Q sum from S&P until Q4-1993 then Thomson Reuters I/B/E/S thereafter. Source: Thomson Reuters I/B/E/S. Page 3 / January, 18 / S&P Forward Earnings & the Economy www.
17 1 1 Figure 3. S&P Forward & Operating Earnings S&P OPERATING EARNINGS PER SHARE: FORWARD & ACTUAL (Thomson Reuters data) (dollars per share) Earnings Per Share Forward* (148.31) Operating** (4Q sum) (128.21) Q3 17 1 1 1 1 9 9 7 7 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 * Time-weighted average of consensus operating earnings estimates for current and next year. Monthly through March 1994, then weekly. ** From S&P until Q4-1993, then from Thomson Reuters I/B/E/S. Source: Thomson Reuters I/B/E/S. 17 1 1 1 Figure 4. S&P OPERATING EARNINGS PER SHARE: FORWARD & ACTUAL (Thomson Reuters data) (dollars per share) Earnings Per Share (pushed 52-weeks ahead) (148.31) Operating Earnings (4Q sum) (128.21) Q3 1/3 17 1 1 1 9 9 7 7 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 * Time-weighted average of consensus estimates for current year and next year. Monthly through December 5, then weekly. Source: Standard & Poor s until Q4-1993, then Thomson Reuters I/B/E/S. Page 4 / January, 18 / S&P Forward Earnings & the Economy www.
Forward Earnings & World Exports 24 Figure 5. S&P FORWARD EARNINGS & WORLD EXPORTS 17 1 1 16 World Exports Value (trillion dollars, annualized) 1 12 9 8 7 4 79 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Haver Analytics, International Monetary Fund (IMF), and Thomson Reuters I/B/E/S. 16 Figure 6. S&P FORWARD EARNINGS & WORLD EXPORTS 16 14 14 1 World Exports Volume (=) 1 8 8 6 6 4 4 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Haver Analytics, Netherlands Bureau for Economic Policy (CPB), and Thomson Reuters I/B/E/S. Page 5 / January, 18 / S&P Forward Earnings & the Economy www.
1 Figure 7. Forward Earnings & OECD Production S&P FORWARD EARNINGS & WORLD INDUSTRIAL PRODUCTION 17 14 1 1 1 1 Industrial Production: OECD (5=) Sep 1 1 9 9 7 8 7 6 79 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Haver Analytics, International Monetary Fund (IMF), and Thomson Reuters I/B/E/S. 4 Figure 8. S&P FORWARD EARNINGS & WORLD EXPORTS 4 - - - - -4 Industrial Production: OECD (5=) 79 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - - -4 Source: Haver Analytics, International Monetary Fund (IMF), and Thomson Reuters I/B/E/S. Page 6 / January, 18 / S&P Forward Earnings & the Economy www.
155 Figure 9. Forward Earnings & US Leading Indicators S&P FORWARD EARNINGS & LEADING ECONOMIC INDICATORS 17 1 135 Nov 1 115 Leading Economic Indicators 1 9 95 7 75 55 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 * Time-weighted average of consensus operating earnings estimates for current and next year. Monthly through March 1994, then weekly. Source: Thomson Reuters I/B/E/S and Conference Board. 4 Figure. S&P FORWARD EARNINGS & LEADING ECONOMIC INDICATORS 4 - - - - -4 US Leading Economic Indicators 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - - -4 Source: Thomson Reuters I/B/E/S and Conference Board. Page 7 / January, 18 / S&P Forward Earnings & the Economy www.
1 Figure 11. Forward Earnings & US Coincident Indicators S&P FORWARD EARNINGS & COINCIDENT ECONOMIC INDICATORS 17 1 Nov 1 1 US Coincident Economic Indicators (4=) 1 1 9 9 8 7 7 6 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Thomson Reuters I/B/E/S and Conference Board. 12 Figure 12. S&P FORWARD EARNINGS & COINCIDENT ECONOMIC INDICATORS 6 8 4 4-4 - -8 US Coincident Economic Indicators -4-12 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19-6 Source: Thomson Reuters I/B/E/S and Conference Board. Page 8 / January, 18 / S&P Forward Earnings & the Economy www.
Forward Earnings & US Business Sales Figure 13. S&P FORWARD EARNINGS & BUSINESS SALES 16 18 14 Nov 16 1 14 1 8 (weekly, dollars per share) 6 8 US Business Sales** (billion dollars, saar) 4 6 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 ** Manufacturing and trade sales. Source: Thomson Reuters I/B/E/S and US Department of Commerce, Bureau of the Census. 15 Figure 14. S&P FORWARD EARNINGS & BUSINESS SALES 4 5 Nov -5 - - - -15 US Business Sales** - - -25 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19-4 - ** Manufacturing and trade sales. Source: Thomson Reuters I/B/E/S and US Department of Commerce, Bureau of the Census. Page 9 / January, 18 / S&P Forward Earnings & the Economy www.
125 Figure 15. Forward Earnings & Production S&P FORWARD EARNINGS & INDUSTRIAL PRODUCTION 17 115 1 5 1 95 US Industrial Production (7=) 1 85 9 75 7 65 55 45 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Thomson Reuters I/B/E/S and Board of Governors of the Federal Reserve System. 15 Figure 16. S&P FORWARD EARNINGS & INDUSTRIAL PRODUCTION 4 5 Nov -5 - -15 - US Industrial Production 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - - - -4 - Source: Thomson Reuters I/B/E/S and Board of Governors of the Federal Reserve System. Page / January, 18 / S&P Forward Earnings & the Economy www.
7 6 5 4 3 Figure 17. Forward Earnings & Employment S&P FORWARD EARNINGS & EMPLOYMENT 6 4 2 1-1 -2-3 -4-5 Nonfarm Payroll Employment 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Dec - - - -4 Source: Thomson Reuters I/B/E/S and US Department of Labor, Bureau of Labor Statistics. 12 8 Figure 18. S&P FORWARD EARNINGS & AGGREGATE WEEKLY HOURS 4 4 Dec Dec -4 - -8-12 Aggregate Weekly Hours** 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - - -4 * Time-weighted average of consensus operating earnings estimates for current and next year. ** Production & nonsupervisory employees. Source: Bureau of Labor Statistics, Thomson Reuters I/B/E/S. Page 11 / January, 18 / S&P Forward Earnings & the Economy www.
Forward Earnings, Orders & Shipments 8. 7.5 Figure 19. S&P FORWARD EARNINGS & FACTORY ORDERS 17 7. (weekly) 1 6.5 6. 5.5 Total New Factory Orders (trillion dollars, saar) Nov 1 1 5. 9 4.5 7 4. 3.5 3. 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Thomson Reuters I/B/E/S and US Department of Commerce, Bureau of the Census. 7.2 Figure. S&P FORWARD EARNINGS & FACTORY SHIPMENTS 17 6.7 (weekly) 1 6.2 5.7 Total New Factory Shipments (trillion dollars, saar) 1 1 5.2 9 4.7 4.2 7 3.7 3.2 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 Source: Thomson Reuters I/B/E/S and US Department of Commerce, Bureau of the Census. Page 12 / January, 18 / S&P Forward Earnings & the Economy www.
Forward Earnings & Capital Spending 27 22 Figure 21. S&P FORWARD EARNINGS & REAL CAPITAL SPENDING Real Capital Spending** (billion dollars, saar) 16 14 S&P (weekly) 1 17 1 8 12 6 7 4 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 ** Nonresidential fixed investment including equipment, intellectual property products, and structures. Source: US Department of Commerce, Bureau of Economic Analysis, and Thomson Reuters I/B/E/S. 4 Figure 22. S&P FORWARD EARNINGS & REAL CAPITAL SPENDING 4 Dec Q3 - - - - (.2) Real Capital Spending** (4.6) - - -4 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19-4 ** Nonresidential fixed investment in real GDP. Source: US Department of Commerce, Bureau of Economic Analysis, and Thomson Reuters I/B/E/S. Page 13 / January, 18 / S&P Forward Earnings & the Economy www.
9 Figure 23. Forward Earnings & Capital Spending S&P FORWARD EARNINGS & NONDEFENSE CAPITAL GOODS ORDERS 17 S&P (weekly) 1 8 Nondefense Capital Goods Orders Excluding Aircraft (billion dollars, saar) Nov 1 1 7 9 6 7 5 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 * 52-week forward consensus expected S&P operating earnings per share. Time-weighted average of current and next year s consensus earnings estimates. Source: Thomson Reuters I/B/E/S and US Department of Commerce, Bureau of the Census. 4 Figure 24. S&P FORWARD EARNINGS & NONDEFENSE CAPITAL GOODS ORDERS 4 - - - - - -4 - Nondefense Capital Goods Orders Excluding Aircraft 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - -4 - Source: Thomson Reuters I/B/E/S and US Department of Commerce, Bureau of the Census. Page 14 / January, 18 / S&P Forward Earnings & the Economy www.
Forward Earnings & US Exports 155 Figure 25. S&P FORWARD EARNINGS & MERCHANDISE EXPORTS 155 135 135 115 (dollars per share) US Merchandise Exports (billions of dollars, sa) 115 95 95 75 75 55 55 35 35 15 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 15 Source: U.S. Department of Commerce, Bureau of the Census and Thomson Reuters I/B/E/S. Figure 26. S&P FORWARD EARNINGS & MERCHANDISE EXPORTS 25 25 Nov -25 (11.6) US Merchandise Exports (.6) -25-86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - Source: US Department of Commerce, Bureau of the Census and Thomson Reuters I/B/E/S. Page 15 / January, 18 / S&P Forward Earnings & the Economy www.
75 Figure 27. Forward Earnings & ISM S&P FORWARD EARNINGS & ISM MANUFACTURING INDEX 4 65 55 45 35 25 ISM Manufacturing Purchasing Managers Index 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - -4 Source: Institute for Supply Management and Thomson Reuters I/B/E/S. 9 Figure 28. S&P FORWARD EARNINGS & ISM PRICES 4 8 7 6 4 ISM Manufacturing Price Index 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - - - -4 Source: Institute for Supply Management and Thomson Reuters I/B/E/S. Page 16 / January, 18 / S&P Forward Earnings & the Economy www.
7 6 6 5 4 4 3 Forward Earnings, Jobless Claims, & Spot Prices Figure 29. S&P FORWARD EARNINGS & INITIAL UNEMPLOYMENT CLAIMS (yearly percent change, inverted scale) Initial Unemployment Claims (4-week moving average, thousands, sa) -4 - - - 2 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 12/ 4 Source: US Department of Labor and Thomson Reuters I/B/E/S. 6 4 Figure. S&P FORWARD EARNINGS & CRB RAW INDUSTRIALS SPOT PRICE INDEX CRB Raw Industrials Spot Price Index 6 4 1/9 - - - - - -4 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - -4 Source: Thomson Reuters I/B/E/S and Commodity Research Bureau. Page 17 / January, 18 / S&P Forward Earnings & the Economy www.
4 Figure 31. Forward Earnings & Trade Weighted Dollar S&P FORWARD EARNINGS & US TRADE-WEIGHTED DOLLAR 4-1/5 - - - -4 JP Morgan Nominal Broad Effective Exchange Rate* (inverted scale) (-7.7) S&P * (11.6) 95 96 97 98 99 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 - - -4 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. ** Time-weighted average of consensus estimates for current and next year. Source: Thomson Reuters I/B/E/S and JP Morgan. Page 18 / January, 18 / S&P Forward Earnings & the Economy www.
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