The Supplemental Retirement Board Meeting held on August 3, 2023, in Portsmouth, Virginia, focused on the current state and future projections of earnings within the S&P 500. Key discussions revolved around consensus estimates for earnings, with projections for 2024 set at $246 per share, while the estimate for 2023 was noted to be around $220.

The board expressed concerns that the 2023 earnings estimate might be overly optimistic, suggesting that actual earnings could ultimately fall below the previous year's figures. Current data indicates a 7% decline in earnings for 2023, which is less severe than the initially forecasted drop of 10% to 15%. This discrepancy was attributed to a resilient market, particularly influenced by a select group of top-performing stocks, referred to as the "magnificent seven."

Further analysis revealed a significant valuation gap between the top 10 stocks and the remaining 490 stocks in the S&P 500, with the former trading at a forward multiple of 31 times earnings compared to 19 times for the latter. This disparity highlights a broader trend of value dispersion within the market.

The board also discussed the implications of these earnings forecasts on the overall market index, projecting a base case for the S&P 500 at 4,200, which represents an 8% decline from current levels. The meeting underscored the importance of tactical asset management decisions, which have historically added value to portfolios.

In conclusion, the board emphasized the need for a reality check regarding earnings expectations, suggesting that while the market has shown resilience, a return to more normalized earnings levels is anticipated. This perspective aims to guide future investment strategies and portfolio management decisions.