US bull market keeps running on growing profit forecasts

US bull market keeps running on growing profit forecasts

Bloomberg / New York

Wondering how US stocks can keep going up in the face of a newly hawkish Federal Reserve and a fast-spreading omicron variant? The answer once again is uncanny resilience in the key measure of American corporate health.

As scary as all the headlines have been, they have yet to enact any appreciable harm on forecasts for S&P 500 earnings. Rather than fall, as case counts climb and the global recovery comes under increasingly worrisome threats, estimated 2022 income for firms in the index actually climbed about $1 to $220.40 a share in the last month.  

It’s possible that analysts have just been slow cutting numbers as the post-pandemic rally approaches its third year. Certainly, some money managers have raised cash holdings and cut equity exposure in anticipation of a worsening economy.

But bulls are acting as though stable profit estimates are believable and unlikely to change. In a year rife with antagonists, from waves of coronavirus outbreaks to supply chain bottlenecks, it’s record earnings per share that kept the bull case intact.

“Healthy economic and EPS growth acts as a foundation under a market which is driven by chronic fears,” said Jim Paulsen, chief