April 28, 2022

Report Card!

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By Scott Wohlers

About half of the companies in the S&P 500 have now reported. So far, revenues are averaging a gain of over 11% and earnings up over 6%. One thing to notice immediately is that earnings are not keeping up with the gains in revenues. This indicates that firms are not yet passing along all their inflationary costs. No surprise here, there is usually a lag. However, earnings are still growing! The Bull and his partners expect more gains.

The latest GDP measure for the first quarter reported a modest negative number. This may have more to do with inventory adjustments rather than actual economic contraction. However, a slowing economy is no surprise. It is unrealistic to expect the torrid growth emerging from the pandemic slowdown to be sustained. The pace of further progress should now be irregular but continue.

The consumer continues to be strong as evidenced by spending up 2.7% in the first quarter. Where they spend may shift more to services from goods, but still at a strong pace. Conclusions to draw, so far, are that the business environment is strong. Most companies are doing well. Despite all the noise about recession, stagflation, and other pronouncements of the sky falling, American enterprise is adjusting and doing well. Stay steady my friends.

The Lonely Bull

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