Analysis: Investors weigh prospects for U.S. corporate earnings as stocks set records

NEW YORK (Reuters) – As U.S. stocks scale fresh record highs, investors are trying to gauge whether next year’s projected profit rebound will be strong enough to add fuel to the rally.

FILE PHOTO: The U.S. flag is seen on a building on Wall St. in the financial district in New York, U.S., November 24, 2020. REUTERS/Brendan McDermid/File Photo

Analysts are projecting that earnings for S&P 500 companies will rise 23% next year after falling more than 15% this year due to the coronavirus pandemic, according to IBES data from Refinitiv.

Yet stock prices have already staged a massive recovery from the March lows of the pandemic, with the S&P 500 index rising more than 60% from its bottom to its recent record highs amid progress toward a COVID-19 vaccine and hopes for a speedy economic recovery.

The S&P 500 is trading at 23 times expected earnings for the next four quarters, only slightly lower than its June peak of 25 times expected earnings – its highest in roughly two decades. Those multiples are well above the long-term average of about 15, based on Refinitiv’s data. The sharp run-up in U.S. shares since March against a backdrop of still-weak earnings has driven up valuations.

Indeed, U.S. stocks have climbed despite another surge in virus cases across the country as well as a slight deterioration in profit projections for next year. S&P 500 earnings growth estimates for 2021 have weakened from 28% on Oct. 1 to 22.5% as of Friday, based on Refinitiv’s data.

“A disconnect is starting to occur,” said Nick Raich, chief executive of The Earnings Scout, an independent research firm.

“So one of two things have to happen. Either estimates have to catch up with price, or price will have to come down if we don’t see a compensatory rise in earnings expectations.”

Longer lockdowns because of the virus are among the reasons the near-term risk for stocks is “skewed to the downside,” Savita Subramanian, head of U.S. equity and quantitative strategy and global head of ESG research for BofA Global Research, wrote in her 2021 outlook report last week.

Some strategists argue that consensus estimates for next year underestimate the rebound that is likely to take place in earnings.

“There was a great sense of just surviving,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, resulting in corporations cutting operations “down to the nubs.”

“If you bring back growth, we’ll have more of that fall to the bottom line than ever before,” he said.

With results in from 97% of companies, the S&P 500 looks set to post just a 6.5% decline in third-quarter earnings, a vast improvement over the 21% fall that had been projected on Oct. 1, based on Refinitiv’s data. Fourth-quarter earnings are projected to decline 11%, versus the 13.6% drop forecast on Oct. 1.

Still, a lot depends on the timing of the rollout of a COVID-19 vaccine, analysts said, since that will determine how fast normal business activity

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Investors weigh prospects for U.S. corporate earnings as stocks set records

By Caroline Valetkevitch



a car parked on a city street: FILE PHOTO: A car waits to enter the financial district security zone near the New York Stock Exchange (NYSE) in New York City


© Reuters/Brendan McDermid
FILE PHOTO: A car waits to enter the financial district security zone near the New York Stock Exchange (NYSE) in New York City

NEW YORK (Reuters) – As U.S. stocks scale fresh record highs, investors are trying to gauge whether next year’s projected profit rebound will be strong enough to add fuel to the rally.

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Analysts are projecting that earnings for S&P 500 companies will rise 23% next year after falling more than 15% this year due to the coronavirus pandemic, according to IBES data from Refinitiv.

Yet stock prices have already staged a massive recovery from the March lows of the pandemic, with the S&P 500 index rising more than 60% from its bottom to its recent record highs amid progress toward a COVID-19 vaccine and hopes for a speedy economic recovery.

The S&P 500 is trading at 23 times expected earnings for the next four quarters, only slightly lower than its June peak of 25 times expected earnings – its highest in roughly two decades. Those multiples are well above the long-term average of about 15, based on Refinitiv’s data. The sharp run-up in U.S. shares since March against a backdrop of still-weak earnings has driven up valuations.

Indeed, U.S. stocks have climbed despite another surge in virus cases across the country as well as a slight deterioration in profit projections for next year. S&P 500 earnings growth estimates for 2021 have weakened from 28% on Oct. 1 to 22.5% as of Friday, based on Refinitiv’s data.

“A disconnect is starting to occur,” said Nick Raich, chief executive of The Earnings Scout, an independent research firm.

“So one of two things have to happen. Either estimates have to catch up with price, or price will have to come down if we don’t see a compensatory rise in earnings expectations.”

Longer lockdowns because of the virus are among the reasons the near-term risk for stocks is “skewed to the downside,” Savita Subramanian, head of U.S. equity and quantitative strategy and global head of ESG research for BofA Global Research, wrote in her 2021 outlook report last week.

Some strategists argue that consensus estimates for next year underestimate the rebound that is likely to take place in earnings.

“There was a great sense of just surviving,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, resulting in corporations cutting operations “down to the nubs.”

“If you bring back growth, we’ll have more of that fall to the bottom line than ever before,” he said.

With results in from 97% of companies, the S&P 500 looks set to post just a 6.5% decline in third-quarter earnings, a vast improvement over the 21% fall that had been projected on Oct. 1, based on Refinitiv’s data. Fourth-quarter earnings are projected to decline 11%, versus the 13.6% drop forecast on Oct. 1.

Still, a lot depends on the timing of the rollout of a COVID-19 vaccine, analysts said, since that will determine how

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Former MPC member Danny Blanchflower to weigh Scottish independence currency and central bank questions as he joins University of Glasgow

ECONOMIST and former Monetary Policy Committee member Danny Blanchflower has highlighted his intention to examine key issues in the Scottish independence debate, such as currency options, as he takes up a role at the University of Glasgow.

Mr Blanchflower, who will continue in his post at Dartmouth College in the US and visit Scotland regularly in his new role, said he was “excited” at the prospect of working with University of Glasgow principal Sir Anton Muscatelli.

The economist, formerly a visiting professor at the University of Stirling, said he would be looking at issues around independence such as what would be involved in creating a central bank and currency options. He cited options of joining the euro, retaining the pound, or forming a currency area union with the likes of Sweden and Iceland. Mr Blanchflower, who has three grandchildren in Scotland, said: “Whichever side you are on, you have to have an answer to that.”

READ MORE: Ian McConnell: Brexit-obsessed Tories must wake to US breath of fresh air, think of the young, and listen to Antony Blinken : Opinion

He also flagged the need to “make economics understandable and adaptable”. Mr Blanchflower, who is joining the economics department at the university’s Adam Smith Business School, said: “I am literally going to come to think about Scotland.”

Noting the Scottish Government’s relatively high popularity with the electorate and its decisions to make period products free and offer free university tuition for Scots, while also touching on the nation’s support for European Union membership, he added: “I think suddenly the attractiveness of Scotland has really jumped.”

Sir Anton said: “Danny comes with an unparalleled reputation and track record, and will be a fantastic addition. As we look to the post-Covid economic recovery, it has never been more important to have well-informed economic commentary and I’m very pleased that we will benefit from Professor Blanchflower’s expertise.”

READ MORE: Ian McConnell on Brexit: Tories will accept any price for hard departure – others will be paying: Opinion

Sara Carter, vice-principal and head of the university’s college of social sciences, said: “The Adam Smith Business School is delighted to welcome Professor Danny Blanchflower as a visiting professor. Danny is internationally renowned for his expertise in economic policy and will bring that experience to the University of Glasgow.”

READ MORE: Ian McConnell on Brexit: Hectoring Tories should get own house in order on Brexit: Opinion

The University of Glasgow said Mr Blanchflower is “renowned for his expertise in labour economics where he has made long lasting contributions in the understanding of unemployment, wages, jobs, health and happiness and pushing the boundaries of several disciplines”.

It noted that Mr Blanchflower, a research associate at the National Bureau of Economic Research, had been made a Commander of the British Empire in the Queen’s birthday honours list in June 2009, for “services to the Monetary Policy Committee and economics”.

Mr Blanchflower said: “I am very much looking forward to joining the economics department at the Adam Smith Business

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As COVID-19 cases soar, U.S. families weigh risks of welcoming college kids home

By Gabriella Borter



a sidewalk sign with a building in the background: FILE PHOTO: Women with protective face masks walk on the University of Michigan campus in Ann Arbor


© Reuters/SHANNON STAPLETON
FILE PHOTO: Women with protective face masks walk on the University of Michigan campus in Ann Arbor

(Reuters) – Nina Jain was regularly checking the nation’s COVID-19 data and holding out hope that her son Antonio, a sophomore who attends college in Iowa, could come home to Sacramento, California, for Thanksgiving this week.

Jain, who works in a government office, had her hopes dashed when she saw U.S. COVID-19 cases rise by an average of more than 168,000 per day last week. Antonio canceled his flight on Friday, hours before it was scheduled to depart, heeding public health warnings that a nationwide dispersal of college students heading home for the holidays could fuel a deadly wave of infections.



a young girl in a parking lot: FILE PHOTO: A woman wearing a protective face mask walks past a sorority house on the University of Michigan campus in Ann Arbor


© Reuters/SHANNON STAPLETON
FILE PHOTO: A woman wearing a protective face mask walks past a sorority house on the University of Michigan campus in Ann Arbor

“It’s like a piece of your heart is 1,500 miles away and there’s nothing you can do about it,” said Jain, 44, whose Thanksgiving plan without Antonio involves wearing pajamas, cooking for herself and spending time with her pets by the fire. “You find solace in knowing you’re doing the right thing.”

As COVID-19 infections skyrocket, families with college students have been forced to evaluate the risk of reuniting for Thanksgiving, when extended American families traditionally gather around the table to eat turkey dinners and show gratitude. Some have opted to roll the dice and celebrate together on Thursday, while some have canceled travel or tried to follow disease prevention protocols at home.



a person and a dog on a leash: Families with college students weigh the COVID-19 risk of a Thanksgiving together


© Reuters/BARBARA GOLDBERG
Families with college students weigh the COVID-19 risk of a Thanksgiving together

The U.S. Centers for Disease Control warn that if college students go home for Thanksgiving, they should be considered guests and families should wear masks, stay six feet apart and open windows to mitigate the infection risk.

Cynthia Wimer, 54, who lives with her husband and elderly parents in Washington, D.C., did not want to take chances when her daughter Francesca, a sophomore at Northwestern University, came home for the holidays.

So Francesca flew home wearing an N95 mask and a face shield and checked into a hotel for 14 days, where her parents delivered her meals. She tested negative on the 7th day but finished her quarantine period to be sure she would not infect her family.

“She was returning to a vulnerable set of people,” Wimer said. “We didn’t trust that a test was enough.”

For some students, last-minute COVID-19 testing before leaving campus derailed their travel.

Luke Burke, a junior at Syracuse University, was planning to spend Thanksgiving with his family in New Jersey until his roommate tested positive last week. Although Burke’s test came back negative, he is isolating in a hotel for two weeks to be safe.

“I’m sorry I can’t be there with my parents, but it’s the right thing to do,” Burke said, speaking to Reuters by phone from his hotel room.

‘WEIRD AWAKENING’

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How to Weigh Student Loan Debt During the College Search | Student Loan Ranger

The college application and decision-making process can be a very exciting time as you picture your life on campus and dream about the future. But it can also be a significant source of anxiety, especially when it comes to paying for tuition and related expenses – and thinking about how much you may need to borrow in student loans.

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Despite the rising cost of college, the good news is that postsecondary education is still generally a good investment for most people – even when it’s necessary to borrow student loans to cover a portion of your expenses. In general, you should not be afraid to borrow to pay for college if that will allow you to gain the skills and knowledge needed to earn more money and build a career.

The best data available consistently shows that more education leads to higher-paying jobs. In fact, according to the U.S. Bureau of Labor Statistics, median weekly earnings in 2019 for workers with a doctoral degree were more than triple the amount earned by those who didn’t earn a high school diploma. Meanwhile, a bachelor’s degree holder earned $1,248, compared with $746 for a worker with only a high school diploma.

While the data is reassuring, it’s equally important to consider whether you personally are making a wise investment when choosing a school and program of study, especially if you need to borrow student loans to finance your education. One reason for this is that some professions simply have more earning potential than others, and the more you earn the easier it likely will be to repay any debt you have after graduation. In addition, some schools do a better job than other of preparing students for a career, which can help you get the job you need to repay your debt.

Therefore, when you consider colleges, you may want to think about whether your degree will be worth the amount of debt that you need to take on to finance your education. Here are four things you should do as you weigh student loan debt during the college search, along with tools to help you make decisions:

  • Go beyond sticker price.
  • Estimate the full cost of earning a degree.
  • Consider if you will be able to afford monthly payments.
  • Compare financial aid award letters.

Go Beyond Sticker Price

The sticker price of any given college or university can be quite high. Fortunately, most schools offer financial aid packages that can help lighten the load if you qualify. In fact, you may even be able to qualify for enough financial aid at a more expensive school to make the portion of tuition that you will be responsible to pay comparable to that of a far cheaper school.

Before you rule out a school you love because it seems too expensive, check the school’s net price calculator to see whether you may be able to lower the sticker price with financial assistance from the school.

Net price calculators are available on

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