An interesting chart was presented to us recently by Morgan Stanley, which depicts how the last twelve months of earnings per share (EPS) growth has historically moved in line with Morgan Stanley’s Leading Earnings Indicator.
As can be seen below, the earnings indicator has trended higher in the previous few months, perhaps a foreshadowing of improving earnings. Through the first quarter of 2017, we are seeing that holding true. As of May 12, 91% of the companies comprising the S&P 500® Index had reported first quarter earnings and 75% of these companies beat mean earnings per share (EPS) estimates, a sign of strength. (Data provided by FactSet). Could this upward trend in earnings growth prove to be a catalyst for another leg higher for the current bull market?
Source: FactSet, Morgan Stanley & Co., Morgan Stanley Wealth Management GIC. Past performance is no guarantee of future results. An investment cannot be made directly in an index.