So far, traders have shrugged off solid first-quarter results as companies that topped earnings estimates have actually averaged a one-day drop of 0.62% in their shares, according to data from Bespoke Investment Group. That’s a far cry from the long-term average gain of 1.86% following earnings beats over the last 15 years.
Considering that the S&P 500 is trading more than 22 times forward earnings, which is near the highest level since 2000, even blowout numbers can’t justify the sky-high valuations. Many analysts are focused on the outlook companies are willing to give as they continue to recover from the coronavirus pandemic.
“It appears the economy is now well on its way to recovery. Still, earnings guidance early in the current reporting season appears to lean more conservative than our economic projections suggest,” said Scott Wren, Wells Fargo’s senior global market strategist.
