Amidst all the uncertainty to the global economy that the Coronavirus pandemic brings, one fact stubbornly persists. The second-quarter earnings for Wall Street will likely still be very problematic. The worst earnings in a decade in fact, according to most analysts.
Wall Street seems to be relying upon a third quarter earnings bounce up from the bottom of the second quarter, yet nobody seems very willing to state exactly where that bottom is, and indeed how much of a retracing back upwards we are likely to see in terms of magnitude.
It may well be a very small bounce indeed.
As is typical, more attention is paid on the forward projections of the market than in the analysis of the previous quarter. This is perhaps a little skewed towards predicting the future whilst ignoring the current situation.
As an example of the above: You can easily glance towards the horizon and guess how many hours it would take to complete your current hike. Look down, though, and maybe factor in the thick mud you will be negotiating all the while. It might double the length of your journey. And that’s just humble mud.
Around one third of the S&P 500 component companies have not published their financials. On top of that, less than half of the usual number of companies have released their quarterly updates ahead of earnings. It all points to companies and corporations not wishing to diminish their stock price with fundamentals that differ to their quite obviously inflated stock price.
All the above information considered, the so-called ‘earnings bounce’ anticipated by Wall Street traders, essentially banking on the fundamental figures released from the top S&P 500 companies, is going to be diminished and underwhelming at best.
The dance continues.