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On March 31 Wall Street analysts were projecting a decline in first quarter earnings of 6.9% for the stocks in the Standard & Poor’s 500, according to Factset. As of May 8, with 86% of the S&P 500 reporting, the consensus projection for the quarter was a drop of 13.6%.

With the dose of reality in their morning coffee, Wall Street analysts are no longer projecting a bounce back to positive earnings growth in the third quarter. As of May 8, the consensus called for an earning drop of  savage 40.6% year over year in the second quarter, a drop of 23.0% year over year in the third quarter and a drop of 11.4% year over year in the fourth quarter.

Wall Street, however is still projecting a hug bounce back in 2021 from depressed 2020 levels with earnings growing 26.9% in 2021 over 2020. If you’re looking for a reason for Wall Street’s optimism, I don’t think you need to look much further. There is, of course, the question of whether that projected 26.9% year over year growth for 2021 will hold up as we get closer to the end of 2020 and get some actual numbers of earnings for the third and fourth quarters.

All these projections are based on very little data. Faced with the huge uncertainties of the coronavirus recession, many companies have simps stopped providing forward earnings and revenue guidance. With, as I noted above, 86% of companies in the S&P 500 reporting, a scant 16 companies have issued positive guidance for the second quarter and just 16 have issued negative guidance.

The climb in share prices–the S&P was up 28.8% from March 29 as of May 8–combined with the drop in projected earnings–down 16.2% in that same period according to Factset–has pushed the market’s forward PE ratio into some heady terrain. As of May 7 the forward PE for the S&P–that is the PE on projected earnings for the next 12 months–had climbed to 20.4. The five-year average forward PE for the index is 16.7. The 10-year average is 15.. This is th first time the forward PE for the S&P 500 ha been above 20 since April 2002.

Of course, no one knows what actual earnings will be for the next 12 months.

Just saying, that on the numbers we have this market is expensive.