On Your Marks, Get Set, Go—Earnings Season
As investors digest the prospect of a more aggressive Federal Reserve, fourth quarter earnings season unofficially gets underway this week.
In recent quarters, S&P 5001 companies proved that analyst profit estimates, on average, were far too conservative.
As of January 7, analysts expect S&P 500 earnings to rise 22.4% versus one year ago (Refinitiv).
- That compares to 43% in Q3 and 96% in Q2, when comparisons were much easier, i.e., strong economic growth vs a recession.
- Historically, anything north of 20% is strong.
Investor’s corner
Strong earnings and favorable commentary could help calm investor jitters that the Fed may be set to ramp up rate hikes this year, as it hopes to rein in inflation.
Investors will also look for commentary about how Omicron may affect business.
They will also want updates on supply chain disruptions, inflation, and how firms may manage rising wages.
Much goes into the stock market pricing equation. Interest rates are important. But let’s not discount corporate profits and expectations over the next six to nine months.