New York, USA – As earnings season approaches, analysts are closely monitoring key indicators to gauge the future of corporate earnings growth and its impact on the stock market. While some indicators suggest a possible slowdown in earnings growth later this year or in early 2025, overall, there are no significant signs of a decline in EPS growth in the next six months. It seems that we are nearing the peak earnings period, but we have not yet reached it.

Consumer Confidence, the US dollar index, and trends in small business earnings are among the leading indicators hinting at a potential pullback in EPS growth. However, other indicators, such as oil prices and goods inflation outlook, offer a more positive outlook for revenue and earnings in the remainder of 2024. Despite challenges like declining pricing power for corporations, overall earnings growth is expected to remain relatively stable in the near term.

While wage growth is anticipated to support profit margins in the medium term, concerns persist regarding the potential impact of factors like the NFIB Small Business Survey’s component on raising prices. Earnings revision breadth and the relationship between earnings growth and the business cycle also play crucial roles in shaping the future of corporate earnings.

Looking ahead, the composite EPS leading indicator suggests a decline in earnings in Q3 followed by a rebound in Q4. Despite limited upside potential, the overall earnings growth outlook remains positive for the next two to three quarters. However, the excessive pricing in the stock market indices indicates that any significant disappointment in earnings could lead to potential downside risks for stocks in 2024.

As short-term risks loom over the market, factors like seasonality, growth uncertainties, and diverging economic indices add to the uncertainty. Investors are advised to remain vigilant as the market remains vulnerable to bearish macro developments. While there are no immediate concerns for a bear market, the current positioning of investors suggests a possible correction in the coming months. It is crucial for investors to stay informed and adaptable in these dynamic market conditions.