Stocks will likely bounce soonâ¦
Earnings Season Will Lead These Stocks Higher Dear Tejas, The world is a mess. And the market is getting pulled down with it. Since the beginning of the year, the S&P 500 is down 19%, while the Dow and NASDAQ are down 14% and 26%, respectively. While we’ve seen some relief this week, we’ll likely continue to experience volatility through the summer as the Federal Reserve continues to try and rein in inflation. We’ve been rehashing the same key culprits all year… rising inflation… continuing supply chain issue… the Russia/Ukraine war and its effect on the European Union… Not to mention the Federal Reserve’s action to quell inflation… the White House’s actions to fix the economy… and the ever-looming recession. I know that some of you out there are nervous about our profit potential on the market right now, and that’s completely understandable. But the fact is folks, fundamentally strong companies with growing earnings and growing revenues will prevail, and bounce like fresh tennis balls. In today’s Market 360, we’re going to look at the market’s trajectory and the best stocks to buy ahead of earnings… Market’s Bounce Is Likely Soon The stock market made a new low on June 16 – mainly due to higher interest rates and inflation fears. However, since then, Treasury bond yields have fallen significantly, and there was a big short-covering rally that often marks a market bottom. Subsequently, there was a flight to quality and institutional window dressing has helped to boost many of fundamentally superior stocks that are expected to announce strong second-quarter results. Finally, the annual Russell realignment is over, which boosted the stocks that were added to the Russell 1000 and Russell 2000 indices. Our friends at Bespoke recently documented that during the past seven times the S&P 500 declined more than 20% for two consecutive quarters, the average gain in the next quarter, next two quarters, and next year was 8.51%, 21.47% and 31.36%, respectively. Nonetheless, the stock market remains in a poor mood, and the financial media won’t quit their recession talk. So, it’s somewhat amazing that we are not in an “earnings recession”… and the analyst community remains largely positive. Currently, FactSet expects rises in S&P 500 earnings of 4.1% and revenue of 10.1%. Frankly, the analyst community is smarter than the macro strategists that keep calling for a recession. The bottom line is fear sells, so negative news continues to overpower positive analyst comments. But earnings are working… and the next round starts next week. It’s why I expect stocks that report solid growth to bounce. | | Louis Navellier Editor, InvestorPlace | |
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