Pro Perspectives 1/24/23

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January 24, 2023
Coming into the year, the consensus view for Q4 earnings season was for a 3.2% decline in S&P 500 earnings.
The noise in the media was for something much worse (an "earnings bust").  
So far, it isn't the blood bath some were expecting.
Keep in mind, this comes in a quarter where the economy was likely growing at a better than 3% annual clip.   
Also keep in mind, when given the opportunity (with low expectations already built in), corporate America will put all the bad news they can muster on the table, lowering the expectations bar, so that they can set up for positive surprises in future quarters.   

That said, we kicked off earnings with the big four banks.  They all set aside capital, adding to what is already a war chest of reserves from the quarters that followed the pandemic lockdowns.   If we add these new Q4 allowances for potential loan losses back, all four of the biggest four banks in the country would have beat earnings estimatesAND improved on the earnings from the same period a year ago.  
Bottom line:  It's not a sputtering economy with a demand problem. It's a hot economy, thanks to the deluge of money still floating around, where demand is being throttled by the Fed.  What happens when the Fed backs off? 
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