Whatās Going On Here?US companies will begin unveiling last quarterās results this week ā and even though theyāre expecting another drop in profits, investors are pretty āidgafā about the whole situation. What Does This Mean?The fourth quarter of 2019 was dogged by trade tensions, which may partly account for the anticipated 1.6% profit drop compared to the year before. A particularly strong fourth quarter in 2018 means that drop looks worse than it is ā though profits also fell in the third quarter, making this twice in a row.
Investors can count on a few sectors being hit: industrials were in the thick of trade disputes, while profits at consumer discretionary companies (which sell things people want but donāt need) are expected to fall 14% from 2018. Thatās largely driven by General Motors: it warned that a strike could make a $2 billion dent in its profit. Why Should I Care?The bigger picture: ĀÆ\_(ć)_/ĀÆ
With the US-China trade deal (finally) set to be signed on Wednesday, investors arenāt too bothered about last year. Theyāre expecting much cheerier news in the year ahead, and hoping 2019ās interest rate cuts will feed through to a more profitable 2020. According to Bloomberg, analysts are expecting US companiesā profits to grow over 9%, with energy, industrials, and materials firms at the forefront. But since much of that profit growth may already be baked into those companiesā stock prices, investors will be inspecting forecasts over the next few weeks to make sure their optimism isnāt misplaced.
For markets: Banks step up to the plate.
Earnings season will start with a bang ā sorry, with the banks: JPMorgan Chase, Citigroup, and Wells Fargo all report on Tuesday. Investors watch banksā earnings closely as they tend to reflect the overall health of the economy (tweet this). Lower interest rates have reduced the amount banks make from each loan, but theyāve also fueled demand for loans: analysts expect profits to grow 6% compared to the year before. | 