Four Things To Keep In Mind About SP500 During this Earnings Season
This week marks the beginning of the first quarter earnings season, but the outlook is not hopeful. Hence SP500 trades have things to consider when placing their bets.
Analysts are predicting a 7% decline in earnings per share (EPS) compared to last year, the largest drop since 2020.
However, this quarter is expected to be the trough, indicating that things will improve from here. It’s important to note that Wall Street has a tendency to react slowly to negative news and quickly to positive news, so it’s best to take any predictions with a grain of salt.
Goldman Sachs recommends paying attention to four themes this earnings season.
First, the margin outlook will provide insight into whether inflation is likely to remain high.
Second, slowing cash use and a decrease in capital expenditures may hinder long-term growth.
Third, comments from companies about how sectors are benefiting from China’s dropping of COVID restrictions will give a clearer picture of the economic situation in that country.
Finally, it will be interesting to hear how companies plan to integrate AI into their operations and the expected margin boost from doing so.
Although profit warnings are not expected this quarter, any company that does issue one will be received poorly by the market.
Additionally, although the S&P 500 has increased almost 7% this year despite downward earnings revisions, the risks are tilted to the downside.
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