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The stock market’s response to the reporting on first quarter earnings over the past few weeks shows that January was likely the moment of peak happiness for investors in this cycle. The earnings results so far have been exceptional, and Wall Street is running out of superlatives to describe them. Roughly 80% of S&P500 companies have beaten consensus earnings forecast, versus the historical average of 64%. These beats are driving first-quarter profit estimates higher. At the start of the year, analysts expected a 12% growth rate and this steadily increased to 18%, including the impact of the U.S. tax cuts announced in December. That number now looks like it will com in around a 22% growth rate, with more to come over the rest of 2018 as the tax cuts work their way through. Yet investors have been unimpressed. Since earnings began with the big bank reports on April 13, the S&P 500 is up just 0.2%. The earnings season started off quietly with the big banks beating expectations on surprisingly strong trading revenues from the likes of Goldman Sachs and Morgan Stanley. But investors were less impressed with slower loan growth at Citi, JP Morgan, Wells Fargo and Bank of America, and so the stocks drifted lower. (more…)