S&P 500 Earnings At Record High

Yippee! S&P 500 operating earnings per share rose to a record high in Q3, for the first time since Q2-2022, and its 4.6% y/y increase was the first such gain in four quarters (chart). Forward earnings rose to another record high during the December 7 week, suggesting the same for actual earnings during Q4.

The just-ended earnings recession was very mild, with three back-to-back quarters of modest single-digit percentage declines on a y/y basis. There was no revenues recession. The earnings weakness of recent quarters has been entirely attributable to the decline in the profit margin due to cost-push inflation, and productivity has been weak because of unusually high turnover in the labor market, with record-high quits and job openings earlier in the year.

November's CPI release today once again showed that inflation has declined significantly since last summer especially excluding shelter, which is coming down too, but more slowly. The headline and core CPI inflation rates excluding shelter were only 1.4% and 2.1% y/y through November (chart). Nevertheless, Fed Chair Jerome Powell is likely to reiterate at his presser tomorrow that the core inflation rate (at 4.0% during November) remains too high and that the Fed is in no hurry to lower interest rates.