Sell-side EPS estimate revisions are tracking at 47%, an improvement from readings in the 30%-range this time last year. In addition, negative pre-announcements may have peaked. “So far trends are improving,” Calvasina wrote in a note.
The virus outbreak may lower 2020 earnings, Calvasina added. While she’s expecting S&P 500 EPS of $174 for the year, an adjustment that incorporates downside effects from the coronavirus knocks the projection down to $172 -- or about 4% growth.
Other risks persist. Stocks look overvalued, sentiment remains overly optimistic and while allocation to stocks is high cash has been low, according to Ned Davis, senior investment strategist at Ned Davis Research.
“The fact remains that median earnings growth” was “only up slightly for 2019,” he said in a note Wednesday. “The tape leans bullish and the Fed is friendly” but “risks are high enough to have a neutral hedge fund trading strategy.”
This article was provided by Bloomberg News.