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Earnings, What Say You?

If you have been watching any of the headlines over the last month, you’ve probably gone through the whirlwind of emotions that come with the unraveling of our economy. 

And I do not blame you.

 In last week’s blog post, I wrote about how I had a crash course on the stock market as a young investment associate. One of the more interesting times of the year was earnings season. Here was a time where Americas biggest and burgeoning companies were scheduled to report to their investors on their revenues, net profits, debt and projections for the forthcoming quarters.

 

It’s safe to say that even the most skeptical of people could not have predicted that the halt of a ten year bull market would be a global pandemic that would have periling economic effects. Insert the year 2020, and we’ve had just that — a phenomenon that no one could’ve predicted, and who’s effects will stretch far past the peak period of contracted cases. Years from now, economists will use this as a case study for capital markets. Doctoral students will try their hand at analyzing the social, psychological and economic complexities of COVID19, and financial institutions will have rewritten the rules of prudent investment management. In short: a new normal is on the horizon. 

So what should you expect from earnings season?

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The best expectation is to have no expectations of this earnings season. Over the past 60 days, we’ve heard bad news that has gotten positive reactions in the stock market and has left fundamentalists scratching their heads. Any advisor, friend, pundit or “source close to federal reserve chairman” that says that they know what will happen next probably doesn’t. I’d take it as a sign to exit stage left on the conversation. If I’ve learned anything about earnings season it is that these four periods per year offer a time to put all of the facts on the table. The facts are ugly, but will reflect the reality of what main street has endured during this time: 

 

  • Over 20 million Americans have filed for unemployment in a single month.
  • The United States has added to the country’s national debt through the 2 trillion dollar  stimulus package.
  • The small business portion of the stimulus package has been depleted, and the plan for emergency disaster grant funds altered to give small businesses less money than anticipated. 
  • Hot bed regions for the corona virus have still not peaked, with the smaller regions and southern states expected to get an uptick in cases. 
  • Schools are still closed, and many are not expected to reopen. 
  • According to the CDC, between March 1st and April 11th, the overall cumulative hospitalizations rate is increasing nationwide. 
  • The value of oil has sunk down into the negatives. (Yes, it has no value.) 
  • Americans are struggling.  

This data may be reflected in the market over the course of this years first earnings season. Yet, there is no reason to make speculative trades or make changes to your financial plan. 

Instead of having expectations for this earnings season, and those forthcoming. This season reminds us to set proper expectations for our money, our values, and our plan to weather the storm. Focus on what you can control, and prepare for the harvest of a more bountiful season.

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