Wall Street Earnings Projections Hit Highest Level Since 1995

Sell-side analysts on Wall Street have set a record high for long-term earnings expectations, projecting an average aggregate growth of 25.5% for the S&P 500 over the next five years. This projection is the highest since 1995 and significantly surpasses the historical compound growth average of 6.5% recorded since 1989.

FactSet Insight reported that this optimism, likely fueled by the potential of artificial intelligence, led to 59.5% of S&P 500 companies receiving buy ratings as of late May, the highest level since 2010.

Market experts have warned that these extreme sentiment indicators often precede bear markets, citing similar peaks prior to the dot-com bubble and downturns in 2018 and 2022. Investment manager Tobias Carlisle cautioned that five-year earnings projections are unreliable indicators, noting that analysts tend to be most inaccurate when their estimates are most extreme.