Goldman Is Concerned: “The S&P Has Surged 6% Since The Election But 2017 EPS Forecasts Haven’t Budged”

Goldman is starting to get concerned.
As chief strategist David Kostin writes in his latest weekly kickstart, while stocks have surged by 6% since the election on the prospect of higher earnings under potential Trump policies, consensus bottom-up 2017 EPS forecasts for S&P 500 have been unchanged. While Goldman explains that “the surge in equity prices to investor optimism about potential policy changes under President-elect Trump; the hope is that new business-friendly legislation will increase EPS and drive shares higher” it then admits that “if new policies eventually lead to upward EPS revisions, it would be a rare occurrence. Since 1984, there have been just six years with materially positive EPS revisions: 1988, 1995, 2004-06, and 2011.”
Not to make a too fine point of it, Goldman also notes that as of this moment, the S&P trades at 20.3x times its 2017 operating EPS forecast, and a vertigo-incuding 18.6x 2018 operating earnings.
Ok, but somehow the delta has to be bridged – how to make up the difference? How about lots of adjustments and addbacks, and hope that Trumpforia will lead to results. In fact, when factoring those two components alone, 2017 EPS surges from 116 to a whopping $130.

This post was published at Zero Hedge on Jan 15, 2017.