Reuters commentator Joachim Klement questioned the profit forecasts supporting U.S. stock valuations in an Oct. 26 column, warning that markets priced for exceptional earnings growth face risk if estimates fail.
Klement argued that projected profits are central to the case for equities. He pointed to a broad historical pattern in which earnings forecasts disappoint most sharply when share prices already reflect unusually strong growth. His warning concerns the reliability of future estimates, rather than a reported decline in current earnings.
In a separate post on Oct. 26, Klement said he had set an S&P 500 target of 5,000 points for the end of 2027. He described that target as about 35% below the index’s level at the time of the post.
Klement said Goldman Sachs published a strategy note after he released the target. According to his account, the note argued that future earnings growth made capital spending and valuations appear more reasonable. Klement challenged the reliance on those earnings projections.
FactSet’s Oct. 23 update put estimated third-quarter S&P 500 earnings growth at 29.5% from a year earlier. That figure blends results from companies that have reported with forecasts for those still due to report. It is therefore an estimate of the full quarter, not a final tally of reported earnings.
FactSet also put the index’s forward 12-month price-to-earnings ratio at 18.7, below its 10-year average of 19.1. The ratio compares share prices with expected earnings over the coming year, so changes in those expectations affect the valuation measure. Both figures were detailed in an earlier report on S&P 500 earnings forecasts and valuations.
FactSet said 179 S&P 500 companies were scheduled to report during the week of Oct. 26. Their results will provide more actual earnings to compare with the blended third-quarter estimate.
