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MarketScape · 09.19.23

Equities May Stumble over Rising U.S. Earnings Expectations

Increasing market expectations for U.S. earnings growth over the next two years have backed large-cap equities. Chief Investment Strategist for North America Chris Shipley examines the assumptions underlying earnings estimates and why the market may be in for disappointment.
  • Volatility & Risk
  • Market Views
  • Commentary
  • Equity Insights
Key Points
What it is
We examine the risks from elevated equity valuations and potentially overly optimistic expectations of U.S. earnings growth.
Why it matters
We believe earnings in 2024 and 2025 will fall below estimates, possibly causing the stock market to stumble.
Where it's going
We are underweight equities globally, favoring high‑yield bonds and natural resource stocks.
Main Point

Earning Expectations Unlikely to Hold Up

High interest rates and our view that U.S. consumer spending will stall make earnings estimates for the next two years appear too high. As a result, we are underweight equities in the U.S. and globally, favoring high-yield bonds and natural resource stocks.

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