(Bloomberg)-Under a solid profit season In the fourth quarter there is a worrying development that can bring a dent in the bull shop for US shares: the profit views of the business America is acidified.
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Among companies that have issued guidance for the next quarter and afterwards, more estimates have given that the expectations of trailanalists. A measure of forward income that compares the predictions of companies with the projections of analysts is the lowest in a year after the fall to a level that was last seen earlier this month in 2016, according to data collected by Bloomberg Intelligence.
There are plenty of reasons for doubt. A fully -fledged trade war will probably weigh the export demand and overseas profit of multinational companies. At home the inflation remains sticky and the Federal Reserve does not seem to be in a hurry to lower the interest rates.
“The uncertainty that comes in this year is as great as it has been in years and managers are trying to navigate with more modest guidance,” said Jim Tierney, Chief Investment Officer of concentrated American growth in Alliancebernstein. “The win results in the fourth quarter are strong, but it was not fully implemented until 2025 guidance.”
Historically, shares respond more to guidelines than actual results, and traders reward companies that have delivered better than expected predictions. Companies that led higher on profit and sell this profit season have performed the S&P 500 index with 6.7% better within one day after reporting results-de, mostly since the early 2020, according to BI data.
Of course, C-suite managers in the coming months can prove to be conservative in their projections, which sets the stage for a rally, because reduced income estimates would lower the bar for companies to erase. In the meantime, analysts hesitate to revise their prospects for this year and then until more companies provide profit guidance. Only 80 companies in the S&P 500 have published the prospects in the first quarter so far.
“This is the classic dance of Wall Street analysts and company guidance, where very ambitious estimates are introduced from the sales side and companies guide them to reports songs,” said Patrick Armstrong, Chief Investment Officer at Plurimi Wealth. “The big question is when will rates have real teeth?”
Even the outlook of analysts for the entire 2025 for the S&P 500 has fallen steadily since the beginning of the year. They see S&P 500 companies grow by 10% this year, a decrease of almost 13% early January, according to data collected by BI. Although predictions are not specified for 2026, with analysts expecting that the profit will still increase by 14% next year.
