Is It Time?
The last few months haven’t been too good for stock market bears. Many have screamed that the market has hit its ceiling, yet it has continued to move higher and higher as investors continue to be more confident in the markets. However, the outcomes of this week can truly outline how the next few months will be, and we might be getting an early sneak peek at a market reversal.
This week marks the start of the earnings season, a time where investors are eager to see the reports their companies release to reevaluate their investments. Earnings have been great for the past year; ever since the COVID-19 stock market crash, companies have shown solid recoveries in their revenue and income. The reactions to this? Well, we can surely say that it was very bullish. All 3 indexes are up more than 75 percent from their COVID dips, as investors were uniquely euphoric about the recovery of the economy.
Unfortunately, that euphoria could come back to bite us. With the current valuations of companies, earnings expectations could be a bit too high. As chief strategist at Principal Global Investors Seema Shah said, the only risk is that expectations are so high that they are going to be difficult to meet. If the broader market fails to meet earnings expectations, prices could certainly revert to more fair valuations than today.
The reversal could easily be on its start; the indexes have fallen for 2 straight sessions, sending many portfolios negative. Netflix reported disappointing subscriber growth after hours on Tuesday, but the main highlight was the highly awaited earnings report from United Airlines. United’s stock price has gone up nearly 150% since the stock market crash as investors priced in an airline recovery into their valuation. This didn’t turn out too well, as United reported a $1.36 billion loss, disappointing the whole industry. However, we still have days left in earnings season, and things can always change. Do you think the market will finally reverse? Or do you believe there is still some gas in the tank?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.