Q4 2023 Earnings Preview: A Glass Half-Full for 2024?

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Making New Year’s resolutions usually involves some level of reflection on how to be a better person and the possibilities ahead. You might write down your goals for the future, while also looking back on your accomplishments (and failures). In doing so, you may find growth where you didn’t expect it, even if it comes in the form of small wins toward your bigger goals.

Looking back at markets, 2023 was certainly a year that may not have seemed so great. With companies yet to report for the fourth quarter, earnings for the year are expected to be flat, which would be the worst year of earnings growth since the world was turned upside down in 2020. Before that, the last time we had flat earnings growth was in 2016. Of course, not every year is smooth sailing. Still, coming into 2023, many anticipated things would be much worse. Investors expected that inflation would remain high or that high interest rates would crush earnings. From that perspective, the economy was resilient, with inflation moving to a more benign place.

So, what are the expectations for the fourth quarter, and how will markets judge whether it was successful—or not?

Another Quarter of Low Expectations

With several big banks set to report tomorrow, the S&P 500 as a whole is expected to report earnings growth of 1.3 percent, with revenue growth of 3.1 percent. While every sector except energy beat earnings expectations in the third quarter, the real problem was that expectations were lowered for the future. When we started the Q3 earnings season, expectations were for growth of more than 8 percent in Q4. So, despite beating Q3 expectations, markets didn’t see much of a positive boost from earnings because future expectations had been lowered.

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