This week’s chart shows the year-over-year earnings growth rates for the S&P 500 over the past five years, plus an estimate for the decline in 2020.
According to FactSet, earnings are expected to fall by a hefty -13.7% this year. This is far below the 10-year average (annual) growth rate of 10% and the largest yearly earnings decline since 2008 (-25.5%).
The Covid-19 pandemic has wreaked havoc on the earnings of several vulnerable industries in the economy. Seven out of the eleven S&P 500 sectors are expected to show declines in year-over-year earnings, led by Energy (-107.2%), Industrials (-48.4%), and Consumer Discretionary (-33.4%).
However, the Health Care and Information Technology sectors have done well during the pandemic and are expected to see positive earnings growth this year. It just so happens that these two sectors also account for the largest weightings in the S&P 500 index, which helps explain why the stock index is poised to finish with a positive return this year.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.