With Q4 earnings season over, it's a good time to check in given that earnings and earnings growth are two of the biggest determinants of stock prices. There are numerous factors to consider such as whether higher inflation is leading to margin compression or a negative impact on consumer spending, if supply chains are improving, getting worse, or something in between, or how companies are feeling about the upcoming year as they issue 2022 guidance.

The major takeaway is that Q4 earnings season once again was much better than analysts' expectations. Going into it, they were expecting earnings growth of 21.1% but finished closer to 30.1%. Margins also stayed close to new highs, implying that companies with margin compression was offset by companies with higher margins due to pricing power. However, several companies complained about rising costs and cited it as headwinds for lower guidance.

Due to the S&P 500's (SPY  ) decline from it's all-time highs in January, coupled with earnings growth, the S&P 500's forward P/E is now at its lowest level in a couple of years at 18.6 and is now below its 5-year average. However, multiples do tend to decline in more inflationary environments with the Fed raising rates.

For Q1, analysts are expecting 4.8% earnings growth for the S&P 500. A month ago, the forecast was 5.7% earnings growth. The softening is likely due to overseas factors like Russia and Ukraine and a slowing in the Chinese economy due to another spike in coronavirus cases. For Q1 guidance, 66 companies have lowered their guidance while 29 companies hiked their forecast.

There are certainly more uncertainties than usual given Russia's invasion of Ukraine, the subsequent sanctions, and potential effects of higher food and energy prices in addition to tighter Fed policy. So far, the economy has been strong enough to absorb these headwinds, so this will be an important test.

There's a lot for investors to be bearish about. But, the biggest factor - earnings - continues trending in the right direction. So far, the positives of inflation have outweighed the negatives and this looks likely to continue in Q1.