In the coming days, Wall Street’s publicly traded companies will start to reveal their earnings reports for the past quarter. Estimates are high, and investor confidence is returning to the stock market. Yes… it’s earnings season!
Recently there has been a focus on specific stocks and how they have been able to grow throughout the volatile first quarter of the year. This week, we may see gains even in the stocks that have struggled from January to the beginning of April.
There are two key factors contributing to increased confidence, and both of them will be important to understand if you have any kind of investment in the stock market, bonds, or even in metals, oil, or gas.
Political Trade Tensions May Be Easing
The early stages of a trade war between the United States and China have dominated financial headlines in recent weeks. Starting with huge tariffs on aluminum, things soon escalated with both countries threatening billions of dollars’ worth of tariffs on goods ranging from Chinese medical equipment to United States pork exports.
The threat of a prolonged trade war sent investor confidence down, which contributed to continued volatility on Wall Street. President Trump recently told a group of lawmakers that “Now we’re really negotiating [the United States and China] and I think they’re going to treat us really fairly.” Some analysts now believe that the United States and China won’t implement any new retaliatory tariffs.
President Trump has also signaled that he would be willing to reconsider the United States joining the Trans-Pacific Partnership if the terms were changed to offer fairer benefits to the nation.
Earnings are Expected to Hit Record Highs
Most important for investors is the fact that quarterly corporate earnings reports are expected to increase by up to 18% when compared to 2017. According to Reuters, S&P 500 companies will average 18.6% increased profits for the first quarter of the year. If the prediction holds true, then this will be the best figure we’ve seen in seven years.
Netflix (NASDAQ: NFLX) is one company that has already released quarterly earnings. The online streaming service signed up 7.4 Million new customers in the first quarter of the year, and the company now has a YTD stock value increase of 60.34%.
Other strong tech, medical, and industrial stocks are also expected to grow as more earnings reports become public.
Wall Street started 2018 on a high but has faced a period of extended uncertainty since then. New confidence will be refreshing for all investors, and widespread fiscal gains for publicly traded companies will reflect the strong position that the economy is in, and could help to ease investors into a more profitable end to the current quarter.
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