Every three months, we take a snapshot of the expectations for future earnings in the S&P 500 (Index: SPX) at approximately the midpoint of the current quarter, shortly after most U.S. firms have announced their previous quarter's earnings.

The latest snapshot is a little early, but still 90 days since the Fall 2024 snapshot. During this time, remarkably little changed in the outlook for the collective earnings of the companies that make up the S&P 500 index. That relative lack of change is a new development that's taken place over the past six months.

That's remarkable because it runs counter to the pattern we typically see in how the outlook for earnings changes with time. That pattern is one in which the expectations for future earnings tend to erode with each later snapshot.

To be sure, that pattern holds in the Winter 2025 snapshot but the amount of erosion is tiny. Looking at the S&P 500's anticipated earnings per share for the end of the fourth quarter of 2025, we find those expectations dipped by $1.49 per share. That's a decline of just 0.6%.

The following chart, covering how earnings expectations have changed from the end of 2021 through 11 February 2025 illustrates both the typical pattern and the relative lack of change in those expectations since 13 August 2024:

The current projection for the S&P 500's earnings per share through the end of 2025 is $249.13, which would represent 18.2% year-over-year earnings growth over December 2024's level of $210.81. Given the typical pattern for how earnings projections develop over time, that figure represents the likely ceiling for potential earnings growth during 2025.

The Winter 2025 snapshot also includes the first projection of the index' expected earnings per share through the end of 2026. The first estimate of what those earnings will be is $289.64 per share.

Reference

Silverblatt, Howard. Standard & Poor. S&P 500 Earnings and Estimates. [Excel Spreadsheet]. 13 November 2024. Accessed 17 February 2025.

Image Credit: Microsoft Copilot Designer. Prompt: "A crystal ball with the word 'SP 500' written inside it". And 'Earnings' written above it, which we added.

The market-moving headlines in the week that was were pretty bad for Wall Street bulls. A higher than expected consumer inflation report on Wednesday, 12 February 2025 would all but seem to have diminished the chances of even one rate cut during 2025. At least, that's the news the market-moving headlines proclaimed.

But by the end of the trading week, investor expectations for the outlook for interest rate cuts in 2025 changed to go in a different direction. The CME Group's FedWatch Tool closed out the week anticipating a quarter point rate cut to be announced after the Fed meets on 7 May (2025-Q2), about 12 weeks earlier than it forecast a week earlier. While that remains the only rate change expected in 2025, the FedWatch tool suggests another quarter point rate cut is likely in January 2026, which could move up into 2025-Q4 if the momentum for the change in expectations continues.

That change coincided with investors shifting their attention once again to 2025-Q4, which coincides with a 1.5% increase in the level of the S&P 500 over the previous week. The index reached 6,114.63 on Friday, 14 February 2025, just several points shy of its all-time record high of 6,118.71 from 23 January 2025. The latest update of the alternative futures chart tracks the trajectory of the S&P 500 changing with along with the changing investment horizon for investors.

Here are the week's market moving headlines, in which the business news media missed the late breaking change in investor expectations for how the Federal Reserve will be setting the Federal Funds Rate in 2025 and beyond.

Monday, 10 February 2025

• Signs and portents for the U.S. economy:
• Trump raises tariffs on aluminum, steel imports in latest trade war salvo
• Where does the US get its steel and aluminum from?
• US copper price premium soars to record after Trump tariff moves
• US steel makers stocks rise, foreign peers fall on Trump tariff plans
• Looming tariffs turned into a mad dash north for one US manufacturer
• Oil gains nearly 2% despite trade war concerns
• Fed minions expected to sit on hands for months before next interest rate move:
• Fed to wait for months on next rate cut as tariffs risk inflation flare up: Reuters poll
• Bigger trouble developing in China:
• China to roll back clean power subsidies after boom
• China's consumer inflation at 5-month high, producer deflation persists
• Nasdaq, S&P, and Dow ended in the green as investors await inflation data
• Gold bulls lock in on glittering milestone; $3,000/oz in sight

Tuesday, 11 February 2025

• Signs and portents for the U.S. economy:
• Oil prices climb to 2-week high on supply worries, US tariffs check gains
• EIA raises US oil production forecast for 2025
• Fed minions say US economy is okie dokie and so are their monetary policies, so there's no need to rush to cut interest rates faster:
• Fed's Powell, quizzed about trade, Musk, and bank safety, says economy is fine
• Powell says there's no rush to ease more given strong economy
• Fed's Williams says monetary policy is in right place to achieve Fed goals
• Bigger trouble, stimulus developing in China:
• Shares of Chinese steelmakers slide as Trump's fresh tariffs add uncertainty on exports
• China's car sales post biggest drop in almost a year in January
• Eurozone minions thinking about responding to US steel, aluminum tariffs:
• EU readies response as Trump hikes steel and aluminium tariffs
• Germany's trade surplus with US reaches new record
• German exports rise, industrial production falls
• Wall Street ends mixed on tariff drama, Fed comments; focus shifts to consumer inflation
• Wall Street ends mixed as Coca-Cola gains and Tesla drops

Wednesday, 12 February 2025

• Signs and portents for the U.S. economy:
• US consumer inflation increases at fastest pace in nearly 1-1/2 years in January
• Inflation heats up more than expected in January CPI
• Hotter January inflation jolts markets, dimming rate cut hopes
• Few mourn the US penny as Trump moves to kill it
• Oil prices retreat after report of U.S. crude stockpile rise
• US fourth-quarter 2024 earnings growth set to be highest in three years
• Fed minions surprised by inflation, thinking about stalling more rate cuts:
• Fed's Powell sees a ways to go on shrinking Fed holdings
• US inflation jump puts Fed officials on notice as Powell testifies
• Fed's Bostic: Not comfortable cutting rates again until there is more clarity on inflation, other policies
• Hot Jan US CPI surprise argues for Fed staying in neutral
• BOJ minions say they're going to aim at 2% inflation for Japan's economy:
• BOJ to conduct monetary policy to achieve 2% inflation target, Governor Ueda says
• BOJ governor says higher food prices in Japan may alter inflation expectations
• ECB minions say they're excited to keep cutting Eurozone interest rates, have dark outlook for Eurozone economy:
• ECB can keep cutting rates even if Fed takes it slow, Vujcic says
• Reuters interview with ECB policymaker Vujcic
• ECB's Nagel wary of blurry 'neutral' rate target, U.S. tariff damage
• ECB's Villeroy reaffirms that Trump policies will likely be negative for economy
• S&P 500 ends down as hot US inflation data hints at fewer rate cuts
• Dividend attention grows as Wall Street digests higher inflation report

Thursday, 13 February 2025

• Signs and portents for the U.S. economy:
• US producer inflation trends higher; labor market remains stable
• Trump outlines reciprocal tariff plan in latest bid to reshape trade on his terms
• Trump's memo outlining reciprocal tariffs plans
• US power companies increase data center demand spending as DeepSeek fears wane
• Higher inflation pushing back timing of Fed minions' expected 2025 rate cut:
• Fed seen likely policy hold until September; Traders add bets on July cut
• BOJ minions expected to keep delivering interest rate hikes because of inflation in Japan:
• Japan's wholesale inflation jumps, reinforcing BOJ rate-hike bets
• Most economists expect BOJ to hike rates in latter half of 2025, survey shows
• Nasdaq, S&P close up 1% as Trump tariff directive staves off new immediate levies
• Wall Street ends higher after Trump unveils tariff plan
• Can the S&P 500 pull off a three-peat 20%+ year? Wells Fargo says, 'In short, no'

Friday, 14 February 2025

• Signs and portents for the U.S. economy:
• Oil edges lower as potential Ukraine peace deal eases supply worries
• US retail sales post biggest drop in nearly two years amid winter freeze
• US manufacturing output falls in January on weak motor vehicle production
• Fed minions to address criticism of how they measure inflation by becoming less clear about it; also say they want to go slower on rate cuts:
• Fed may only nuance much-maligned ‘averaging’ strategy
• Fed's Logan calls for caution on rate cuts, even if inflation cools
• Bigger trouble, stimulus developing in China:
• Chinese exporters brace for 'rat race' in shift away from US
• China January bank lending hits record high on policy stimulus
• China's property loan contraction eases after government support
• Dow, S&P, and Nasdaq closed mixed as markets snapped a two-week losing streak

The Atlanta Fed's GDPNow tool's projection of what real GDP growth will be in the 2025-Q1 dropped from last week's +2.9% to +2.3% on 14 February 2025.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull excited by good earnings news". This is pretty generic cartoon for which we dropped in a headline to capture what the market-moving headlines missed!

Mathematician John Conway loved playing games. He also loved using math to invent games, the best known of which is his Game of Life. Not the Hasbro board game, but rather a game based on simple mathematical rules that simulates the life and death of simple organisms.

Since its Valentine's Day, we thought we'd take inspiration from Conway's Game of Life by playing the game in a way that he might have done. We drew the outline of a heart on the Game of Life grid, much like the one on the left hand side of our featured image, and let the game play out to see what patterns might emerge from that starting design. We next drew another heart, the same size as the first one, but this time, filling in the inside of the heart.

But before we clicked the button to "start reproducing", we wondered how that simple difference might change the outcome of the game. Would the filled-in heart produce similar patterns to the simple outline of a heart? Would it "live" longer, or rather, would it go through more generations than the outlined heart before it might either stagnate (reach a pattern that doesn't significantly change) or die out (disappear altogether)?

We're not going to tell you the outcome, because it's easier to find out for yourself. Draw your own heart in the grid below by clicking the squares to make it, then click the "start reproducing" button to bring it to life. Then try again with a variation of your first heart design. If you're accessing this article on a site that republishes our RSS news feed, please click through to our site to access a working version.

Click on table cells to toggle the cells as alive or dead.

We will say we were surprised by the symmetry in the patterns that emerged from our initial hearts. If you play the game again, you might try making your heart design a little different. Would the outcomes change if you made it bigger or smaller? What would happen if you only filled in half of the heart? Would that live longer or shorter than your previous longest-lasting initial heart design? What would change if you made that design asymmetric? Is it possible to tweak your heart design to make its descendant patterns stay alive forever?

We don't know the answers to any of those questions. Yet. The best way to find out is to play. Have fun and a happy Valentine's Day!

Previously on Political Calculations

• John Conway's Game of Life
• Omniperiodic Oscillators in the Game of Life
• A Game About Love and Graphing
• A Formula for Love
• The 37 Percent Solution
• The Maths of Love
• Math Formula Explains Geek's Dating Drought

The pace at which carbon dioxide is being emitted into the Earth's atmosphere is continuing to set new record highs.

China, by far and away, the world's largest source of carbon dioxide emissions, helped cinch the new record. A new analysis by Carbon Brief indicates "the tail end of China’s rebound from zero-Covid in January and February, combined with abnormally high growth in energy demand, stopped CO2 emissions falling in 2024 overall," despite China's surge in green energy production during the year.

Carbon Brief estimates China's overall CO₂ emissions "grew by an estimated 0.8% year-on-year". That growth may may sound small, but since China's emissions are so large, even a small percentage increase in its CO₂ output carries substantial impact. Carbon Brief also recently confirmed that China's emissions have caused more global warming than the 27 countries that make up the European Union. Not that that's any kind of surprise.

In the last two decades, much of the increases in the rate at which carbon dioxide accumulates in the Earth's atmosphere can be traced to Chinese government's various efforts to stimulate China's economy. The following chart highlights that contribution from January 2000 through January 2025:

China's ending of its repressive zero-Covid lockdown policy at the end of 2022 constitutes the beginning of its latest stimulus. Combined with China's government's ongoing efforts to continue its stimulus effort to offset recessionary forces acting within the Chinese economy, the result is the record high rate of CO₂ accumulation in the modern era, which now extends back over sixty-five years. The next chart illustrates that history:

What defines the modern era is the collection of data on the concentration of carbon dioxide in the Earth's air. Those measurements began at the remote Mauna Loa Observatory in March 1958. Since our long-term chart tracks the year-over-year change in atmospheric CO₂ we could have set its initial month at March 1959, but we opted for January 1960 instead to align it with the beginning of a calendar year.

In any case, the following references provide links to the Mauna Loa Observatory's full dataset of its atmospheric carbon dioxide measurements.

References

National Oceanographic and Atmospheric Administration. Earth System Research Laboratory. Mauna Loa Observatory CO2 Data. [Online Data]. Updated 5 February 2024.

Image credit: Jungliangcheng Power Plant in Tianjin, China by Shubert Ciencia on Flickr. Creative Commons CC by-SA 2.0 Attribution 2.0 Generic Deed.

December 2024 saw imports to the United States surge. The increase in foreign goods coming into the U.S. during the month was driven by two main factors:

• A potential strike at U.S. east coast ports as the deal the Biden-Harris administration worked out with labor unions to end a three-day strike in early October 2024 was only for three months. The prospect of the deal expiring again in January 2025 without a labor agreement put firms trying to bring foreign goods into the U.S. in the position of trying to beat the clock ahead of another disruptive strike. The same thing happened in the months preceding the October strike.
• A similar dynamic applied to west coast ports, as firms seeking to bring Chinese-produced goods into the U.S. tried to front-run potential tariffs threatened by President-elect Donald Trump and the doubling of real tariffs on semiconductors imposed by the Biden-Harris administration that were set to go into effect in 2025. The same thing happened during the summer of 2024, thanks largely to firms trying to beat the clock on new trade restrictions imposed by the Biden-Harris administration.

Focusing on trade between the U.S. and China, the following chart shows a year-over-year increase from December 2023 to December 2024:

We anticipate January 2025's trade levels will be elevated as Chinese firms typically boost their shipments ahead of the country's week-long Spring Festival holiday, which falls in early February this year. We'll also note that January saw surprisingly few sustained trade actions by the incoming Trump administration, most of which involved very short-lived tariffs. That is changing with tariffs being announced on steel and aluminum in February, so we'll need to develop a new counterfactual to measure their impact.

We'll also be taking a last look at the anti-free trade legacy of the Biden-Harris administration, which has been more negative than President Trump's trade actions during his first term.

References

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with China, Not Seasonally Adjusted, Nominal Figures, Total Census Basis. [Online database]. Accessed 5 February 2025.

Image credit: Port Of Los Angeles by Linnaea Mallete on PublicDomainPictures.net. Creative Commons Creative Commons - CC0 Public Domain.