We are now past the peak of the first-quarter earnings season. Fifty-six percent of the S&P 500 by market value has now reported, and first quarter results in aggregate are already showing modest gains (+0.5%) on a year-over-year basis.

Despite fears of an outright "earnings recession" (two quarters of negative year-over-year earnings), actual results have exceeded consensus estimates by 4.3% thus far, well above the historical average beat rate of 3%. Huge beats from mega-cap tech-related companies (Amazon, Facebook, Microsoft) have been the key positive drivers. Even assuming a more average beat rate of 3% for the remainder of the earnings season, 1Q S&P 500 EPS growth should be close to 2%, or toward the high end of our expectations going into the season.

Similar to last week, guidance continues to be generally favorable. 2Q S&P 500 consensus estimates have been trimmed by 0.5%, which is in line wit historical patterns. However, given the better 1Q results so far, full-year S&P 500 EPS consensus estimates have steadied around our USD 168 forecast (+3%). Our 2020 EPS estimate of USD 179 (+7%) remains unchanged.

Following the 18% year-to-date gain in the S&P 500, markets have erased their prior oversold conditions experienced during the end of 2018. With the S&P 500 now trading at approximately 17 times forward earnings, we believe US stocks are fairly priced and are already incorporating much of the improving profit picture that we anticipate later in the year. Our six-month S&P 500 price target is 2,950 and we are neutral US equities in our tactical asset allocation.

A longer version of this article is available as part of our blog series.