ICYMI: The S&P 500 Earnings Scorecard & What to Buy

We’re now three-quarters of the way through earnings season. The profit outlook for corporate America is looking up. If current S&P 500 profits hold, it would be the first time in two years companies have generated positive earnings growth for two consecutive quarters.

So here are the numbers. As of last night, 370 of 500 S&P 500 companies have reported aggregate sales and earnings growth 4.3% and 5.2% respectively (year-over-year). Below are the top-five leading sectors so far, broken down by year-over-year earnings growth:

  1. Utilities (9 of 28 reported): +17.9%
  2. Real Estate (20 of 29): 11.4%
  3. Information Technology (55 of 66): +10.2%
  4. Financials (60 of 63): +9.8%
  5. Consumer Staples (28 of 37): +7.2%

WHAT TO BUY

Heading into the first quarter of 2017, we like Energy (XLE) and Financials (XLF). Why? As you can see in the video above, these sectors, particularly the Energy sector, were severely challenged from the end of 2015 into early 2016. (Energy and Financials sector earnings were down -72.6% and -5.4% in the fourth quarter of 2015).

In other words, we’re lapping last year’s tough times so the earnings outlook is looking up. We say buy them.

(Note: These sectors also benefit from two of our core macro themes U.S. #GrowthAccelerating and #InflationAccelerating.)