Financial Times says Wall Street earnings forecasts may be too high

In short: A Financial Times newsletter argues that US stock market earnings forecasts look overly optimistic, and it says current data does not yet show AI driving a big jobs shock.

What's going on

Analysts who follow big US companies are forecasting strong profit growth this year. The Financial Times cites FactSet estimates that S&P 500 earnings per share could rise about 13 percent in the first quarter, with forecasts of roughly 19 to 21 percent growth in later quarters.

The newsletter points out a mismatch between those upbeat forecasts and the stock market’s mood. The S&P 500 has been weak in recent weeks and has been mostly flat since last September. When that happens, the article argues, markets often turn out to be right before analysts adjust their numbers.

One reason, it says, is that analysts focus closely on individual companies and may be slower to factor in bigger economic risks like sustained high oil prices. The newsletter notes that a ceasefire could ease worries, but it also highlights concerns that high energy costs can slow the economy over time. A strategist cited in the piece puts the odds of a 2026 recession at 35 percent, higher than his usual range.

The second part looks at anxiety about AI and jobs, especially for new graduates. The newsletter notes that US unemployment for recent college graduates is 5.6 percent, above the overall 4.2 percent. But it says the trend does not clearly point to AI as the cause, and job openings in fields like legal and accounting have not pulled away sharply from the wider market.

What to watch

The newsletter says AI’s impact on jobs may be gradual, more like a slow shift in what work is needed (like a store slowly changing its shelves) than an overnight collapse. It warns that a recession could speed up job changes and make the transition more painful.

Source: Financial Times