Wall Street Lowers S&P 500 Earnings Growth Forecast from 11.4% to 6.9%

Mike Wilson: "Rare Occurrence in Non-Recession Times"

"U.S. Companies Facing Greater Uncertainty than Pandemic"

Wall Street analysts are significantly lowering earnings estimates for U.S. companies, reflecting recession risks. This is a rare occurrence in non-recession times.

According to Bloomberg on the 21st (local time), Michael Wilson of Morgan Stanley recently pointed out that "Wall Street analysts are lowering S&P 500 company earnings at an unprecedented level." He stated in a report that "companies are facing greater uncertainty than at the start of the pandemic," making profit forecasts more challenging.

According to Bloomberg Intelligence data, analysts have revised the earnings per share growth forecast for S&P 500 companies from 11.4% at the beginning of the year to 6.9%.

Wilson stated that the extent of earnings revisions peaked a year ago. This was well before the S&P 500 index reached its highest point. This supports his view that the index correction has progressed much further than the market generally expects, with some stocks and sectors already reflecting a mild recession.

Wilson explained, "This is why we are more interested in stocks and sectors that may have already discounted a mild recession." In other words, if a recession can be avoided, it is likely that the market hit its low point two weeks ago. However, if a recession materializes, the S&P 500 index could fall further.

The strategist sees the expected range for the S&P 500 index between 5,000 and 5,500 until recession risks are confirmed by concrete indicators or dismissed. He mentioned that the most important factor is the employment report.

Wilson also noted that overseas companies, including those in Europe and China, are rapidly adjusting their performance to reflect the U.S. economic downturn. Therefore, he concluded that relative strength in the U.S. market could appear amid market weakness.

The S&P 500 index closed at 5,280 points last Thursday. Concerns that President Trump's tariff policies would negatively impact the economy and fuel inflation have led to a sell-off in U.S. stocks this year. The ongoing earnings season has not significantly helped improve investor sentiment. U.S. investors are seeking investment opportunities outside the U.S. The MSCI World Index, representing developed countries excluding the U.S., has risen over 6% this year, while the S&P 500 index has fallen 10%.

Guest reporter Jung-A Kim kja@hankyung.com