April 24, 2023

 

This week, approximately 2,500 publicly traded companies will report Q1 earnings, and some will provide forward guidance. Given the heightened concerns about the potential for an economic recession, this is a pivotal time for earnings because this quarter, more than any other in recent memory, will indicate the likely depth of the earnings reversal we are currently witnessing.

 

Wall Street analysts have been lowering earnings expectations for the past nine months. While most companies are expected to beat these lowered estimates, we are nonetheless presently amid an earnings contraction. Thus, the reports we get for Q1 and the guidance we receive for the remainder of the year will be crucial. This is a big week.

 

Among companies reporting this week, the more high-profile names are Coca Cola, Whirlpool, Archer-Daniels, Alphabet, Microsoft, Owens-Corning, Texas-Instruments, American Airlines, Amazon, Boeing, Intel, Meta, Apple, Berkshire Hathaway, Caterpillar, Chevron, McDonalds, Nestle, Exxon Mobil, and a slew of regional banks.

 

By the end of the week, we will have a much clearer picture of the present state of earnings across the economy and among the biggest and most widely held stocks. We will also get a sense of the severity of the challenge and the condition of the nascent recovery in the banking sector. Given the economic uncertainty, the information gleaned this week will indeed be welcomed and informative.

 

It’s certainly easy to get caught up in the spectacle of earnings season at such an important economic time. Nonetheless, taking a step back from the earnings season and thinking more broadly about the meaning of it all, we think it is important to orient oneself to the bigger picture and to the longer term.

 

The bigger picture is that we are using the return generating power of the capital markets for our wealth creation goals. Whatever happens in the next 3-12 months on the earnings front, the stock market in the long run and across all sorts of economic challenges throughout our history, has proven to be a compelling solution for building wealth. Whatever transpires in the short term, it is really the long-term features of the market that we are interested in harnessing. This doesn’t change.

 

So, while times are presently murky, remember this season will pass. And rest assured we will be diligently evaluating earnings in the coming weeks and prudently managing your assets.

 

We thank you for the trust you place in us.