EPS growth expectations slide lower

Long-term earnings expectations fell to 7.6% this week amid market volatility and down from 12% at the start of the year. The data, compiled by Bloomberg, reflect earnings-per-share growth over the next business cycle, a period of three to five years.

Earnings growth, as measured by the earnings-per-share of the S&P 500 index, had been relatively flat since the end of the third quarter of 2018, despite being at record highs. The trailing 12-month index EPS was $152.70 as of Monday's close, up only 1% since Sept. 30, 2018.

The good news, or perhaps bad, depending on your interpretation, is that forward equity returns show correlation with long-term growth expectations. However, growth estimates below 8% have been rarer when compared with the higher estimates since 2010. The majority of growth figures in the years since the global financial crisis have been 8.5% or above.