Anticipated 2015 S&P 500 earnings continue to slip lower despite 75% of index-member companies having reported first-quarter results that beat their consensus expectations. Calendar-year 2015 growth expectations have now dropped marginally into negative territory , placing an exclamation point on the precipitous decline from the much healthier 12.6% growth that was expected just six months ago. Depressed crude oil prices and -65% first-quarter earnings growth in the energy sector remain the predominant drag on S&P 500 profitability, but the appreciation of the U.S. dollar exchange rate is clearly weighing on other sectors. For example, first-quarter industrial sector earnings growth has declined by 1.6% over the past two weeks to 5.1% on April 16 from the 6.7% growth rate expected on April 2.
Even now, after six months of dollar appreciation and downward pressure on crude oil prices, analysts, investors, and investment managers are still digesting the speed, magnitude, and ramifications of these disruptions as evidenced by persistent downward revisions to calendar-year 2015 earnings expectations. Financial market participants undoubtedly are now contemplating what the future might hold in terms of energy commodity pricing, and of the foreign exchange market.
Source: S&P Capital IQ
Looking forward, we anticipate that future foreign exchange and crude oil price trends will continue to impart a significant influence on expected corporate earnings growth. We also believe that these markets are in the very early stages of establishing a new post financial crisis equilibrium that will be driven by an eventual realignment of global central bank monetary policies. This process should ultimately lead to diminished volatility in the commodity and foreign exchange markets. Think of this as the long awaited -- Great Normalization -- of post-financial crisis global monetary policy. A coordinated upswing in global economic activity, which we believe reflects the underlying nature of free market capitalism, will have massive implications for commodity prices, currencies, collective monetary policy, and market interest rates, not to mention corporate earnings for globally focused companies, such as those in the S&P 500 index. The latest quarterly earnings results will provide a reasonable guidepost for interpreting future expectations, which is perhaps more intriguing than usual since consensus forecasts for 2015 S&P 500 earnings growth have now dipped marginally into negative territory.