Weaker results for a second consecutive quarter should be followed by a jump, history suggests
Earnings season may bring more disappointment for investors as results miss for the second consecutive quarter,
But it seems that many investors are fine with what will be the smallest growth in annual earnings in 3 years because history suggests it will be followed by a rebound of more than 7%.
“The market is pricing in an earnings increase,” Chris Gaffney, president of world markets at TIAA, told Bloomberg. “The environment overall is very good.”
However, TIAA chief executive Roger Ferguson told Bloomberg TV that returns that the average investor can expect in the coming years will be slightly lower than they have been used to. He said that diversification will be a key strategy with alternatives worth considering.
Analysts are expecting a 1.6% drop in S&P500 profits in the final quarter of 2019 according to Bloomberg Intelligence. But they are also predicting a 3.2% increase in the first quarter of 2020 and a 9.1% annual rise.
Among the big banks, JPMorgan will be first to report earnings Tuesday and its analysts led by Mislav Matejka expect that the earnings growth will continue unless there is a recession.
“In other words, one needs to believe that a full-blown recession is imminent to be bearish on earnings from here,” JPMorgan analysts said in a client note.
