Expert insight

What earnings estimates miss about the equity market

August 29, 2022

Twelve-month-ahead earnings per share expectations have frequently tracked the S&P 500 Index over the last three decades but have diverged in 2022 as equity prices have fallen while earnings expectations have continued to increase.
The chart decomposes elements of the S&P 500 Index’s 13.3% decline in the first seven months of 2022. Interest rates and inflation explain 9.6 percentage points of the decline. Further considering a 0.7% gain in actual earnings growth and 7.5% growth in consensus earnings per share in the period yields an 11.9% implied decrease in market expectations for earnings.


Ian Kresnak
Vanguard Information and Insights

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