- SUMMARY
As earnings season unfolds, Goldman Sachs’ David Kostin maintains his target of 5200 for the stock market, anticipating a modest 2% appreciation by year’s end.
Earnings reports so far indicate that 65% of companies have surpassed revenue expectations, while 33% have exceeded earnings estimates.
Despite inflation concerns, the limited price increases implemented by corporations have allowed them to maintain their margins.
Kostin predicts that margins will remain stable and that earnings growth will be driven by economic expansion.
However, he observes an inflection point in companies’ ability to pass on price increases to customers.
Some CEOs are considering altering service terms rather than raising prices outright to maintain market share.
Business activity remains robust, but the extent of price hikes has been limited.
Interest rates and inflation concerns, which dominated discussions a week ago, have taken a backseat to earnings.
The current expectation of 3% year-over-year earnings growth is a low bar that Kostin projects could be exceeded, potentially yielding 7% growth.
In summary, while the stock market is tracking expectations, earnings remain the primary focus in the coming weeks.
Companies’ ability to manage margins and pass on price increases will influence future market performance.
- Key Takeaways
Goldman Sachs maintains a target of 5200 for the stock market, expecting a modest 2% gain by year’s end.
Earnings reports indicate companies are surpassing expectations, and limited price increases have allowed them to maintain margins.
Kostin predicts stable margins and earnings growth driven by economic expansion.
However, he notes an inflection point in companies’ ability to pass on price increases, with some considering alternative strategies to maintain market share.
Earnings have taken precedence over interest rates and inflation concerns in recent discussions.
The current expectation of 3% year-over-year earnings growth is considered a conservative estimate that could potentially reach 7%.