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Is There A Disconnect Between Earnings Growth And GDP Growth?

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Is There A Disconnect Between Earnings Growth And GDP Growth?

Needless to say, investors are more than happy to see their stocks gain in value this earnings season, but few are taking a step back and asking the important question: Is there reason to be concerned that earnings growth is outpacing GDP growth? The short answer, at least according to CNBC, is no.

Earnings Vs. GDP

According to CNBC, there is a valid reason to explain how it is American companies can grow their earnings despite recent GDP data showing the economy grew at its slowest pace in three years at just 0.7 percent. Meanwhile, around 46 percent of all sales from S&P 500 companies are attributed to markets outside of the United States.

The American economy remains by far and large the world's biggest, but it is far from the world's fastest growing — and companies are well positioned for international growth.

CNBC noted that the International Monetary Fund has even raised its growth forecasts for key markets such as China, the entire eurozone, Japan and the U.K., which marks a complete reversal from this time last year, it was lowering its global outlook.

Growth outside of the U.S. is expected to help boost earnings per share growth among S&P companies by more than 12 percent for the first quarter, which marks the greatest level of growth dating back to the third quarter of 2011.

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