Earlier this year, economists and analysts at major investment banks feared high inflation and rising interest rates would combine to pull corporate earnings lower in the spring. But so far, Bank of America says the results have been “better than feared.”
Among S&P 500 companies, 279 firms, comprising 71% of the blue-chip index’s earnings, have reported their financial results through Monday. Overall, these companies have managed to beat analysts’ earnings per share estimates by 3%, Bank of America strategists, led by Savita Subramanian, said in a research note on Monday.
“Results were better than feared, especially with more above-consensus guidance than below, which was the biggest positive surprise,” they wrote. “But we are still in the very early innings of [the] downturn and estimate cuts.”
Even with the modestly bullish results, and a more than 9% recovery in the S&P 500 over the past month, Bank of America argues the bear market has more room to run.
The investment bank’s strategists track 10 key “bull market signposts” that have historically indicated the end of bear markets, and as of Monday, just 30% were signaling the worst is over for stocks, compared to 80% at the end of previous bear markets. These signposts include factors like changes in unemployment, strength in the manufacturing sector as measured by the purchasing managers’ index (PMI), and the slope of the yield curve, or the difference between long- and short-term interest rates on government bonds.
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This article was originally published on Fortune.com on August 1, 2022.