Week in Review: Corporate Earnings Season is Better than Anticipated but Growth Trends are Negative…

Week In Review – Friday, May 19th, 2023

Corporate Earnings Season is Better than Anticipated but Growth Trends are Negative…

Corporate earnings season is largely complete and overall came in better than expected. On March 31st, prior to the reporting season, earnings for the S&P 500 were expected to decline year-over-year by 6.7%. With over 90% of S&P 500 companies reporting, the blended decline is 2.5%. So, while the trailing earnings for the S&P 500 are down, the decline is less than feared and lower expectations for the rest of the year have stabilized.

On a trailing 12-month basis, earnings are still slightly positive, but should drop into negative territory in the coming quarters. Relative to history, negative earnings growth will be reflective of slower economic growth and likely at least a shallow recession.

However, historical trends have shown that periods of negative earnings growth have been relatively brief and marked by rapid recovery with the notable exception of 1990-1992, which saw a double dip.

At Pallas Capital, we believe that stock prices ultimately follow long-term earnings per share growth. While we expect near-term earnings growth to fall into negative territory, stock prices tend to recover in anticipation of an earnings rebound.

Overall, the current earnings season has come in better than expected. While the near-term trend in earnings is still down, longer term we expect earnings growth will once again inflect positively, driving a broader market recovery.

Important Disclosure:

The preceding information is for general educational purposes only.  It is not intended to be investment advice, and is not specific to any individual’s personal situation.  Any decision about investing should be undertaken only after careful consideration of the investment’s risks, costs, liquidity or lack thereof, and the investor’s timeframe.

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product referred to directly or indirectly in this newsletter will be profitable, or equal any corresponding indicated historical performance level(s).

Investment Advice offered through Pallas Capital Advisors, LLC, a registered investment advisor.

CRN23_13

Mark-Bogar

Mark A. Bogar, CFA®, CAIA®
Chief Investment Officer
Pallas Capital Advisors

Stephen Kylander

Stephen Kylander
Senior Portfolio Manager
Pallas Capital Advisors

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The information contained herein is for informational purposes only, is not personalized investment advice and should not be construed as a recommendation to purchase or sell any particular security, sector or strategy to any individual person or entity. The decision to review or consider the purchase or sale of any security, sector or strategy mentioned should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional. Past performance should not be considered as an indicator of future results.

Investment Advice offered through Pallas Capital Advisors LLC, a registered investment advisor.

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