SUMMARY
- The S&P 500 is up nearly 17% year-to-date and now up more than 20% since the October 2022 lows. However, with full year 2023 earnings per share estimates down 3.3%, there seems to be a disconnect.
- A key reason for this disconnect could be skewed P/E valuations. Currently, the 12-month forward P/E for the S&P 500 is 18.9x, which is above the 5-year average of 18.6x and well above the 10-year average of 17.4x. Another key reason could be the lack of market breadth, as only a handful of Big Tech companies have truly been driving S&P 500 returns higher.
- As we head into the second half of the year, and with Q2 earnings season set to start in the next few weeks, analysts are projecting full year 2023 earnings growth of only 0.9%, compared to the 4.2% earnings growth expected for 2023 in January.
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