The SPDR S&P 500 ETF Trust is off to a shaky start to 2022, and Bank of America analyst Ohsung Kwon cut his 2022 S&P 500 EPS forecast on Monday heading into first-quarter earnings season.
The Numbers
Kwon is now projecting 6 percent S&P 500 EPS growth this year, down from his previous estimate of 6.5 percent growth. Looking ahead to 2023, Kwon is calling for just 4 percent growth.In addition to the earnings cuts, Bank of America also cut its 2022 global GDP growth forecast from 4.3 percent to 3.6 percent. Kwon said every 1 percent drop in U.S. GDP has historically translated to about a 3 percent or 4 percent hit for S&P 500 earnings.
Kwon said inflation, supply chain disruptions and geopolitical uncertainty have created a scary backdrop for investors in 2022, but Bank of America’s latest analyst survey suggests there are still plenty of positive catalysts for stocks, including booming consumer demand, strong balance sheets, and healthy capex levels.
Recession Risk
Kwon said U.S. recession risks are “low but rising,” and recessions have historically resulted in a 15 percent to 20 percent drawdown from peak to trough S&P 500 EPS levels.“While an economic recession is not our base case, the concern has been growing among market participants as the Fed tries to slow the economy to curb inflation,” Kwon said.
For the upcoming first-quarter earnings season, Bank of America is calling for 9 percent S&P 500 EPS growth, well above consensus analyst estimates of just 5 percent growth.
Benzinga’s Take
Bank of America’s full-year 2022 S&P 500 EPS growth estimate of 6 percent is well below consensus estimates of 9 percent growth. BofA is calling for earnings growth to decelerate from first-quarter levels throughout the remainder of the year, while consensus estimates are calling for earnings growth to accelerate.By Wayne Duggan
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