A version of this post first appeared on TKer.co

Earnings estimates for the next 12 months are rising.

And earnings estimates for 2025 and 2026 have been coming down.

The above statements sound like they’re in conflict. But they are actually two ways of communicating the same information. The differentiating factor: The passage of time.

We often hear analysts talk about earnings estimates based on calendar years. For example, coming into this year Wall Street strategists presented their estimates for 2025 earnings.

As time passes and information emerges, analysts will adjust those estimates. Historically, analysts tend to gradually revise down these calendar year estimates. And so far, this has been the case in 2025.

However, time can pass quickly. And with calendar year estimates, what was once a discussion about future earnings can quickly become a discussion about past earnings.

For example, at the beginning of the year, 2025 earnings represented the next-12 months’ (NTM) earnings. But it’s April now, which means any discussion of 2025 earnings involves an old quarter, and any discussion of NTM earnings involves a quarter in 2026.

Morgan Stanley’s Michael Wilson shared a nice side-by-side visualization of this somewhat confusing dynamic. The chart on the left shows the S&P 500’s NTM earnings per share (EPS). As time passes, you can see NTM EPS move up as it continuously incorporates the higher earnings expected in future periods.

The chart on the right shows EPS estimates for 2025 and 2026 — static periods in time. As time passes, you can see how analysts’ estimates have moved lower in recent months.

NTM earnings estimates look good despite calendar year estimates coming down. (Source: Morgan Stanley)

“NTM EPS estimates continue to advance on the back of stronger 2026 EPS growth,” Wilson observed. “However, NTM EPS may show signs of flattening in recent weeks as 2025/2026 estimates revise slightly lower (-1%).”

To be clear, both charts employ the same analysts’ estimates for earnings. They just differ in the way they reflect the effect of the passage of time.

And the two charts are currently telling us that the promise of earnings growth on a rolling future basis is more than offsetting deteriorating expectations for static periods.

This is important in the context of valuation metrics like the forward price-earnings (P/E) ratio. If earnings are expected to grow, then forward earnings (E) will rise as time passes. This leads to downward pressure on P/E ratios.

As we discussed last week, there are currently a lot of issues with analysts’ earnings estimates. Uncertainty is very high, and there’s evidence that the earnings estimates out there right now are stale.

But again, both visualizations are working off the same estimates. So if we believe the estimates for E is off, discussions about both NTM and calendar year estimates will similarly be off.

The bottom line: Be mindful about what you read and hear about earnings estimates. While it can be helpful to know what’s going on with revisions in certain calendar years, the information for a particular year will become less relevant as time passes. This is why it’s arguably more useful to look to NTM earnings because stock prices are heavily determined by expectations for the future.

There were several notable data points and macroeconomic developments since our last review:

🛍️ Shopping ticks higher. Retail sales increased 1.4% in March to a record $734.9 billion.

(Source: Census via FRED)

Unfortunately, there’s evidence that recent spending has been boosted by consumers front-running tariffs. The 5.3% jump in car and car parts sales is in line with this trend. From Renaissance Macro’s Neil Dutta: “It’s challenging to get a proper signal from retail sales data at the moment. Households are taking tariffs seriously and we have seen a front running of activity, particularly in consumer durables. Ultimately, follow underlying growth. It’s been softening.”

For more on consumer spending, read: We’re gonna get ambiguous signals in the economic data 😵‍💫 and Americans have money, and they’re spending it 🛍️

💳 Card spending data is holding up. From JPMorgan: “As of 10 Apr 2025, our Chase Consumer Card spending data (unadjusted) was 3.0% above the same day last year. Based on the Chase Consumer Card data through 10 Apr 2025, our estimate of the US Census April control measure of retail sales m/m is 0.50%.”

(Source: JPMorgan)

From BofA: “Total card spending per HH was up 2.3% y/y in the week ending Apr 12, according to BAC aggregated credit & debit card data. Among the categories we show, the biggest gains relative to last week were in entertainment, online electronics & grocery. The increase could be due to a dual boost from upcoming Easter and front-loading due to tariff uncertainty.”

(Source: BofA)

Similar to March retail sales, April spending is likely being boosted by consumers pulling forward purchases in an attempt to front-run tariffs.

For more on consumer spending, read: We’re gonna get ambiguous signals in the economic data 😵‍💫 and Americans have money, and they’re spending it 🛍️

💼 Unemployment claims tick lower. Initial claims for unemployment benefits declined to 215,000 during the week ending April 12, down from 224,000 the week prior. This metric continues to be at levels historically associated with economic growth.

(Source: DoL via FRED)

For more context, read: A note about federal layoffs 🏛️ and The labor market is cooling 💼

⛽️ Gas prices tick lower. From AAA: “As spring break travel winds down, gas prices are following suit, down five cents since last week. Softer demand is fueling this downward trend, and with crude as low as it’s been in a few years, drivers may continue to see lower pump prices as summer approaches.”

(Source: AAA)

For more on energy prices, read: Higher oil prices meant something different in the past 🛢️

👎 Inflation expectations heat up. From the New York Fed’s March Survey of Consumer Expectations: “Median inflation expectations increased by 0.5 percentage point to 3.6% at the one-year-ahead horizon, were unchanged at 3.0% at the three-year-ahead horizon, and decreased by 0.1 percentage point to 2.9% at the five-year-ahead horizon.”

(Source: NY Fed)

The introduction of tariffs as proposed by president-elect Donald Trump would be inflationary. For more, read: 5 outstanding issues as President Trump threatens the world with tariffs 😬

👎 New York area managers are worried about the future. From the NY Fed’s Empire State Manufacturing Survey: “Firms expect conditions to worsen in the months ahead, a level of pessimism that has only occurred a handful of times in the history of the survey. The index for future general business conditions fell twenty points to -7.4; the index has fallen a cumulative forty-four points over the past three months. New orders and shipments are expected to fall slightly in the months ahead. Capital spending plans were flat. Input and selling price increases are expected to pick up, and supply availability is expected to worsen over the next six months.”

(Source: NY Fed)

From the NY Fed’s Business Leaders Survey: “After plunging twenty-five points last month, the index for future business activity sank another twenty-three points to -26.6, its lowest reading since April 2020, indicating that firms expect a significant decline in activity in the months ahead. The index for the future business climate also fell twenty-three points, to -50.0, marking its lowest level since 2009 and suggesting the business climate is expected to remain considerably worse than normal. The future employment index turned negative. The future supply availability index dropped to -36.1, with 44 percent of firms expecting supply availability to be worse in six months. Capital spending plans turned sharply negative.”

(Source: NY Fed)

Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.

For more on this, read: What businesses do > what businesses say 🙊

🛠️ Industrial activity ticks lower. Industrial production activity in March declined 0.3% from the prior month. Manufacturing output increased 0.3%.

(Source: Federal Reserve)

For more on economic activity cooling, read: 9 once-hot economic charts that cooled 📉

🔨 New home construction starts fall. Housing starts fell 11.4% in March to an annualized rate of 1.32 million units, according to the Census Bureau. Building permits ticked up 1.6% to an annualized rate of 1.48 million units.

(Source: Census)

🏠 Homebuilder sentiment ticks up. From the NAHB’s Buddy Hughes: “The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity. At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots.”

(Source: NAHB)

🏠 Mortgage rates rise. According to Freddie Mac, the average 30-year fixed-rate mortgage increased to 6.83% from 6.62% last week. From Freddie Mac: “The 30-year fixed-rate mortgage ticked up but remains below the 7% threshold for the thirteenth consecutive week. At this time last year, rates reached 7.1% while purchase application demand was 13% lower than it is today, a clear sign that this year’s spring homebuying season is off to a stronger start.”

(Source: Freddie Mac)

There are 147.4 million housing units in the U.S., of which 86.9 million are owner-occupied and about 34.1 million of which are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.

For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖

😬 This is the stuff pros are worried about. According to BofA’s April Global Fund Manager Survey: “Trade war triggering a global recession is viewed as the biggest ‘tail risk’ according to 80% of investors, the largest concentration for a ‘tail risk’ in 15-year history.”

For more on risks, read: When uncertainty becomes unambiguously high 🎢, Three observations about uncertainty in the markets 😟 and Two times when uncertainty seemed low and confidence was high 🌈

📉 Near-term GDP growth estimates are tracking negative. The Atlanta Fed’s GDPNow model sees real GDP growth declining at a 2.2% rate in Q1. Adjusted for the impact of gold imports and exports, they see GDP falling at a 0.1% rate.

(Source: Atlanta Fed)

For more on GDP and the economy, read: 9 once-hot economic charts that cooled 📉 and You call this a recession? 🤨

🚨 The tariffs announced by President Trump as they stand threaten to upend global trade — with significant implications for the U.S. economy, corporate earnings, and the stock market. Until we get some more clarity, here’s where things stand:

Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.

Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, while cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — has shifted its focus toward supporting the labor market.

But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like excess job openings have faded. It has become harder to argue that growth is destiny.

Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.

Stocks are not the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have adjusted their cost structures aggressively. This has come with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.

Mind the ever-present risks: Of course, this does not mean we should get complacent. There will always be risks to worry about — such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, cyber attacks, etc. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.

Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect to experience as they build wealth in the markets. Always keep your stock market seat belts fastened.

Think long term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term investors can expect to continue.

A version of this post first appeared on TKer.co