{"id":12235,"date":"2023-01-26T17:20:12","date_gmt":"2023-01-26T17:20:12","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12235"},"modified":"2023-01-26T17:20:12","modified_gmt":"2023-01-26T17:20:12","slug":"will-earnings-beat-lowered-expectations-in-2023","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/will-earnings-beat-lowered-expectations-in-2023\/","title":{"rendered":"Will Earnings Beat Lowered Expectations in 2023?"},"content":{"rendered":"\n<p><em>Cecilia and Jorge R. from Richmond West, FL ask: <\/em>Hi Mitch, my husband and I saw on the news last night that most investors are expecting very weak profits and earnings this year. It feels counterintuitive to want to own stocks when profits are falling. What are we missing?<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for your question. Let\u2019s first dig into the news story you saw, which highlighted falling expectations for U.S. corporate earnings in 2023. Wall Street consensus is calling for an approximately -4% decline in aggregate Q4 2022 profits (year-over-year) for S&amp;P 500 companies. This profit decline would be the first since the economic shutdown in early 2020 when the pandemic struck. Consensus goes on to forecast profits declining in the first half of 2023, only to rebound in the second half for a full-year +4% gain.<sup>1<\/sup><\/p>\n\n\n\n<p>Zacks Investment Research has a slightly different outlook for corporate earnings in 2023, as seen in the chart below. We see a bigger decline in Q4 2022 but agree on an earnings rebound in the second half. Regardless, the bottom line remains the same \u2013 corporate earnings are expected to be weak in the first half of 2023 with a rebound expected later in the year.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2023_01_26_b&amp;content=ultimate_retirement_portfolio\">Rebalance Your Investment Portfolio to Meet Your Ultimate Retirement Goals<\/a><\/u><\/strong><\/p>\n\n\n\n<p>For investors nearing retirement, it\u2019s common for market ups and downs to cause you to worry and uncertainty about your financial future.<\/p>\n\n\n\n<p>The key is to define your investment objectives, determine your asset allocation, and manage your investments over time. To help you better prepare and plan for retirement while navigating through the market downturns, we\u2019re offering our guide,<em> 7 Secrets to Building the Ultimate DIY Retirement Portfolio<\/em>, which covers:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How to accurately establish your retirement income needs<\/li>\n\n\n\n<li>Developing an investment discipline that allows you to get good results over time<\/li>\n\n\n\n<li>Investing rules to help you avoid self-sabotage<\/li>\n\n\n\n<li><strong><em>Plus, our views on key steps to create and maintain the ultimate retirement portfolio<\/em><\/strong><\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, get this guide to learn our ideas on building and maintaining a retirement portfolio to potentially achieve your long-term goals.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2023_01_26_b&amp;content=ultimate_retirement_portfolio\">Get our FREE guide:\u00a07 Secrets to Building the Ultimate DIY Retirement Portfolio<\/a><\/u><sup><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2023_01_26_b&amp;content=ultimate_retirement_portfolio\">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"615\" height=\"320\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/01\/pic1-2.png\" alt=\"\" class=\"wp-image-12236\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/01\/pic1-2.png 615w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/01\/pic1-2-300x156.png 300w\" sizes=\"auto, (max-width: 615px) 100vw, 615px\" \/><figcaption class=\"wp-element-caption\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Zacks Investment Research<sup>3<\/sup><\/figcaption><\/figure>\n\n\n\n<p>In your question, you make the point that it feels counterintuitive to own stocks when profits are falling, which based on the above forecasts would mean not owning stocks in the first half of 2023. I understand where you\u2019re coming from \u2013 a key objective in owning shares of stocks is to own a portion of future profits and earnings. If those profits are falling, then wouldn\u2019t that be a time to ditch stocks, at least until earnings recover?<\/p>\n\n\n\n<p>While this line of thinking may make logical sense, there\u2019s a problem \u2013 the stock market is a <em>discounting<\/em> mechanism, meaning that the decision whether or not to own stocks does not depend on what earnings will do in the coming quarter or two, but rather where earnings are headed a year-plus from now. If you expect earnings to recover later this year and on into next, then it would make now the time to own stocks, in my view.<\/p>\n\n\n\n<p>By the same logic, investors should consider that last year\u2019s weakness in the stock market was likely driven by a pricing-in of current corporate earnings weakness, several months and even a year before it took place. After all, we know with the benefit of hindsight that expectations for S&amp;P 500 earnings estimates peaked last April (see chart below).<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"615\" height=\"441\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/01\/pic2-1.png\" alt=\"\" class=\"wp-image-12237\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/01\/pic2-1.png 615w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/01\/pic2-1-300x215.png 300w\" sizes=\"auto, (max-width: 615px) 100vw, 615px\" \/><figcaption class=\"wp-element-caption\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Zacks Investment Research<sup>4<\/sup><\/figcaption><\/figure>\n\n\n\n<p>The question now for investors is whether earnings will surprise to the upside in 2023, and whether or not you want ownership in the possibility of a profit rebound later in the year and early 2024. If the answer is yes to both, then it would make now the time to be in stocks, in my view.<\/p>\n\n\n\n<p>If you\u2019re nearing retirement in this volatile market, I recommend taking a look at rebalancing your portfolio. This takes a lot of work and dedication, and I want to share some additional steps to help you! Download our exclusive guide,\u00a0<em><strong><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2023_01_26_b&amp;content=ultimate_retirement_portfolio\">7 Secrets to Building the Ultimate DIY Retirement Portfolio<\/a><\/strong><\/em><sup>5<\/sup>, to get insight on how to protect your investments and create a portfolio that meets your financial goals.<\/p>\n\n\n\n<p>If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Earnings expectations for 2023 have dropped steadily, and many see a weak first half with a rebound in the second half. How should investors react? <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-12235","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12235"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12235\/revisions"}],"predecessor-version":[{"id":12239,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12235\/revisions\/12239"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}