As the second quarter earnings season starts drawing to a close, we can look back and see quite a bit of relief from market watchers. Certainly expectations were as low as they could have been, the bar set so low that it wasn’t much effort to exceed the analyst possibilities. But what we have seen here is guidance from companies – which seems to be better than many could have expected.
This is quite the change from previous quarters, and given the softness of the first half of 2016 (GDP grew at an estimated 1%). Yet, markets have accepted the current earnings and are looking toward brighter days ahead. And thus, that is what markets do – look forward. The stock market is the most efficient discounting mechanism out there. The markets call it right every time.
This current earnings season has many feeling twisted. Companies with great earnings have their stock beaten up, while those who miss have seen their stocks soaring. What gives here? Well, simply put the market is looking down the road. There is no magic or secret sauce in analyzing here, yet market players ‘see’ what is happening and go with the flow (money/liquidity that is).
So when someone tells you, ‘hey why did my stock go down when their earnings were so good’, just smile and tell them to look toward the future.
