This week’s featured chart shows that the percentage of companies in the U.S. stock market-beating earnings expectations increased significantly in the first quarter of the year, breaking a prolonged downturn that started near the end of 2021.
As the middle section of the chart shows, the earnings beat rate increased to 77.1% in the first quarter. This was a surprisingly large reversal that broke the downtrend from last year. It also lifted the year-to-year point change—shown in the bottom segment—to zero.
This is significant because, historically, a year-to-year point change in the beat rate greater than zero has resulted in strong annualized gains for the U.S. stock market—to the tune of about 9.85%, on average. So, any more improvement from here would be a potentially positive development for U.S. stocks, as it would signal that we’ve pivoted from a weak earnings environment to a stronger one.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.