So far, surprises have been minimal during the highly anticipated earnings season for Q1 2022.
Banks like Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) kicked things off with positive earnings reports that were slightly higher than analysts expected. That’s great news because we typically look to banks to set the tone for the rest of the earnings season.
When the Fed lowers interest rates, it stimulates financial activity, so the banks benefit. We’ll have to see if that translates into more consumer spending. However, we’re also watching fluctuations in consumer stocks like Netflix (NASDAQ:NFLX). On Wednesday, the streaming giant announced that it had lost subscribers for the first time in a decade, and its stock promptly plummeted 35%.
The question now is, how should you handle dips like that and the rest of the volatility this season brings?
Here’s how we tackled those concerns this week…
Stocks to Buy Before Earnings
During Monday’s livestream on our Learning Markets YouTube channel, we talked about how quarterly earnings reports are starting to come out, and with that, there are a lot of potential surprises.
Some sectors and groups are much better positioned for gains than others — especially when we think about the potential impact of rising inflation.
We examined which stocks and groups looked best before earnings. Those continued to include consumer defensives — think Procter & Gamble, Coca-Cola, etc., but more specifically, retailers who sell those household goods. We’re still bullish on transportation and technology as well. We also talked about whether the trending inverted head-and-shoulders pattern indicated a bull or bear market, and the answer might surprise you.
Click here to watch a replay of Monday’s video.
Don’t Stay on the Sidelines
More and more companies are releasing earnings reports, and we’ve been interested to see how certain transportation and shipping, consumer, and travel stocks will do in light of pandemic restrictions and supply chain pains easing.
On Wednesday, we noted that by the end of this week, more than 17% of the stocks in the S&P 500 will have reported first-quarter earnings.
We should have a good feel for what to expect through May at that point. Although top- and bottom-line numbers look reasonably positive, there is some evidence that margins are going to decline again.
For now, the balance is in favor of higher prices, but we don’t expect another breakout like 2021.
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How to Survive Earnings Season
On Thursday, we ended up having a bit of a rough day with stocks pulling back. However, the S&P 500 is still sitting on support; we are just getting rolling into earnings season, and it’s turning out to be a pretty good earnings season so far.
Looking forward to next week, while we don’t really have any major economic announcements, we will be getting the Advanced GDP number for Q1 of 2022 and the Core PCE Price Index number. But what does that mean for you?
These numbers will give some great insight into where the U.S. economy is going during this inflationary period as well as what the Fed’s favorite inflationary indicator is telling us about inflationary pressure.
There’s a lot to talk about with what’s happening with the S&P 500 and with earnings season being full of volatility and uncertainty.
Click here to watch last night’s livestream replay and learn how we can continue to maneuver in this market… without losing our shirts.