Category Archives: forecasting

Summer 2023 Snapshot of the Future for S&P 500 Dividends

The outlook for S&P 500 (Index: SPX) quarterly dividends per share continued to improve during the three months since our previous regular snapshot.

That's good news following the turmoil earlier this year kicked off by the Silicon Valley Bank run on 10 March 2023. Dividend futures quickly collapsed with projected dividends for the index in 2023-Q4 dropping from $16.99 to $15.94 per share by 29 March 2023.

By 24 April 2023 however, they had recovered to $16.95 per share, but that was before First Republic Bank's and PacWest Bank's reported troubles, which sent the expected dividends for 2023-Q4 back down to $16.75 per share, which is where it was at our last snapshot from 8 May 2023.

Since then, the S&P 500's expected dividends for the fourth quarter of 2023 have continued their rocky recovery path. The following chart shows what the outlook is for the S&P 500's dividends as of our latest snapshot on 18 August 2023.

Past and Projected S&P 500 Quarterly Dividends per Share Futures, 2021-Q4 through 2023-Q4, Snapshot on 18 August 2023

We find the S&P 500's projected quarterly dividends per share for the fourth quarter of 2023 has risen to $17.03 per share in this new snapshot. However, in between 8 May 2023 and 18 August 2023, the projected dividends per share for this quarter had risen as high as $17.17 per share on 24 July 2023 before retreating to its current level. The path for the S&P 500's dividends per share continues to be rocky.

We'll take our next scheduled snapshot of the outlook for the S&P 500's quarterly dividends per share in about three months.

Summer 2023 Snapshot of Expected Future S&P 500 Earnings

Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 (Index: SPX) at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

Since our last update three months ago, expectations for the S&P 500's has dimmed slightly. Expectations for the index' future earnings per share through the end of 2023 has decreased from $203.50 to $200.27.

Never-the-less, that's still high enough to indicate a full recovery from 2022's earnings recession is still on track for the fourth quarter of 2023.

The following chart illustrates how the latest earnings outlook has changed with respect to previous snapshots:

Forecasts for S&P 500 Trailing Twelve Month Earnings per Share, December 2017-December 2024, Snapshot on 16 August 2023

Standard and Poor's projections through the end of 2024 also showed a small decline in thie index' earnings per share. They show the S&P 500's earnings per share decreasing to $222.93 from the $226.88 expected three months ago.

About Earnings Recessions

Depending on who you talk to, an earnings recession has one of two definitions. An earnings recession exists if either earnings decline over at least two consecutive quarters or if there is a year-over-year decline over at least two quarters. The chart identifies the periods in which the quarter-on-quarter decline in earnings definition for an earnings recession is confirmed for both the Pandemic Earnings Recession (December 2020-December 2021) and the new earnings recession (March 2022-December 2022) according to the first definition. The regions of the graph shaded in light-red correspond to the full period in which the S&P 500's earnings per share remained below (or are projected to remain below) its pre-earnings recession levels.

Our next snapshot of the index' expected future earnings will be in three months.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 16 August 2023. Accessed 16 August 2023.

Spring 2023 Animated Snapshot of the Future for S&P 500 Dividends

Empty bank safety deposit boxes by ptone805 via PxHere - https://pxhere.com/en/photo/1596745

After the Silicon Valley Bank run in the first quarter of 2023, dividend futures quickly collapsed.

That collapse can best be seen in the CME Group's quarterly dividend index futures for the S&P 500 (Index: SPX) during the fourth quarter of 2023. Going into 10 March 2023, the dividend futures for 2023-Q4 stood at $16.99 per share. It quickly bottomed at $15.94 per share just six days later. Then it bounced as high as $16.41 per share on 21 March 2023 before dropping once more to hit its bottom again on 29 March 2023.

Since then, the outlook for 2023-Q4's dividends has more sustainably improved. When we last presented 2023's dividend futures, the dividends expected in 2023-Q4 had recovered to $16.41 per share as the risk of more bank failures appeared to be concentrated within a handful of regional banks.

Flash forward to today, the following animated chart covering the period from 6 April 2023 through 12 May 2023 reveals that recovery has continued, but has followed a rocky road.

Animation: Past and Projected S&P 500 Quarterly Dividends per Share Futures, 2021-Q4 through 2023-Q4, 6 April 2023 through 12 May 2023

Starting from where we left off on 6 April 2023, 2023-Q4's dividend futures continued to rise, eventually peaking at $16.95 on 24 April 2023. But the specter of more bank failures returned with the First Republic Bank the following weekend, sending dividend futures downward again. After PacWest Bancorp reported it was rapidly losing deposits on 11 May 2023, the outlook for 2023-Q4's dividends has fallen back to $16.75 per share.

That mostly brings us up to date. Individually, the failures of Silicon Valley Bank, First Republic Bank, and Signature Bank represent the second, third, and fourth largest bank failures in U.S. history. Together, their combined deposits of $368 billion dwarfs the $188 billion held by Washington Mutual when it became the largest bank failure in U.S. history in 2003.

The fifth largest bank failure in U.S. history occurred in August 2009 with the collapse of Colonial Bank, which held $20 billion in assets. 2023's bank failures have so far been in been in a league all their own. It's no wonder the prospects for more bank failures is weighing on the outlook for the S&P 500's dividends.

Image credit: Empty bank deposit boxes. Photo by ptone805 via PxHere. Creative Commons. CC0 1.0 Universal (CC0 1.0) Public Domain Dedication.

Spring 2023 Snapshot of Expected Future S&P 500 Earnings

Green Leaf Plant Sprout by Sushobhan Badhai via Unsplash - https://unsplash.com/photos/LrPKL7jOldI

Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 (Index: SPX) at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

Since our last update three months ago, expectations for the S&P 500's has improved. The change reverses the negative pattern where earnings expectations have worsened at each of our snapshots since May 2022.

That negative pattern coincides with the onset of an earnings recession for the S&P 500, which became slightly shallower than previously projected over the previous three months. The bottom for that earnings recession is still December 2022, which rose to $172.75 per share from an estimated $171.52 in our Winter 2022 snapshot.

Looking forward to the end of 2023, expectations for the index' future earnings per share has increased from $199.28 to $203.50. Earnings at that level would correspond to a full recovery to the level of earnings recorded in March 2022, which marks the beginning of the S&P 500's earnings recession.

The following chart illustrates how the latest earnings outlook has changed with respect to previous snapshots:

Forecasts for S&P 500 Trailing Twelve Month Earnings per Share, December 2017-December 2024, Snapshot on 9 May 2023

Standard and Poor's projections also provide a first look at the level of earnings anticipated at the end of 2024. They show the S&P 500's earnings per share increasing to $226.88.

About Earnings Recessions

Depending on who you talk to, an earnings recession has one of two definitions. An earnings recession exists if either earnings decline over at least two consecutive quarters or if there is a year-over-year decline over at least two quarters. The chart identifies the periods in which the quarter-on-quarter decline in earnings definition for an earnings recession is confirmed for both the Pandemic Earnings Recession (December 2020-December 2021) and the new earnings recession (March 2022-December 2022) according to the first definition. The regions of the graph shaded in light-red correspond to the full period in which the S&P 500's earnings per share remained below (or are projected to remain below) its pre-earnings recession levels.

Our next snapshot of the index' expected future earnings will be in three months.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 9 May 2023. Accessed 9 May 2023.

Image credit: Photo by Sushobhan Badhai on Unsplash.

Dividend Futures Recovering Somewhat After Silicon Valley Bank Run

On 10 March 2023, federal bank regulators shut Silicon Valley Bank. Their action followed a run on its deposits, some of which was captured in the following video showing part of the line that formed outside Silicon Valley Bank as depositors rushed to pull their money out from it.

The failure of Silicon Valley Bank represents the second largest bank failure in U.S. history and was quickly followed by the third largest, Signature Bank, just two days later.

These failures changed the outlook for U.S. stock market investors, which can be quantified by how they've changed the expected future for dividends, as measured by the CME Group's S&P 500's Quarterly Dividend Index Futures. Previously, we've animated how they evaporated in the week following the failure of Silicon Valley Bank.

But in the weeks since, the outlook for the S&P 500's expected dividends has improved. That improvement is shown in the following animated chart tracking how the amount of dividends expected for the S&P 500 in each upcoming quarter through the end of 2023 has changed since 17 March 2023.

Animation: Past and Projected S&P 500 Quarterly Dividends per Share Futures, 2021-Q4 through 2023-Q4, 317 March 2023 through 6 April 2023

Perhaps the easiest way to quantify how that outlook has changed is to look at the expectations for 2023-Q4's dividends per share, because the numbers are easy to work with. On 10 March 2023, investors expected the companies that make up the S&P 500 index would pay a quarterly dividend of $16.99 per share.

One week later, on 17 March 2023, the amount of dividends expected to be paid by S&P 500 companies in the fourth quarter of 2023 had fallen to $16.00 per share.

But now, through 6 April 2023, investors anticipate the S&P 500's dividend payout for 2023-Q4 will be $16.47 per share. In the three trading weeks since 17 March 2023, dividends has recovered a little over 47% of how much they lost in the week immediately after the second and third largest bank failures in U.S. history.

It's still a long way from a complete recovery, which appears unlikely at this writing. We'll check in again on how that future is changing sometime in mid-May 2023.