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A strong corporate earnings season has strengthened the case for equities.
Recent developments have led many investors to expect more rocky trading in the coming months, after an 18% advance in 2021 which took the S&P 500 to 44 record close. The rapidly spreading Delta variant of the coronavirus has cast a cloud over the economic outlook, and the price hike has sparked debate over whether sustained inflation will hamper the recovery. The Chinese crackdown on businesses, meanwhile, is pushing analysts to consider the possibility of dragging down US markets.
With the emergence of these potential hurdles, investors have been encouraged by a bumper earnings season in which the share of large US companies exceeding earnings expectations is set to break an all-time high. Plus, companies turn more of their sales into profits, keeping their profit margins at record highs.
“The reported earnings have certainly helped allay investor concerns that earnings may not keep pace with the stock market,” said Gene Goldman, chief investment officer at Cetera Financial. “They kept pace.
While the bulk of earnings reports are available, investors this week will analyze the results of companies such as Tyson Foods Inc., eBay Inc. and Walt Disney Co.
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