At earnings season action, with strong results and weak routine performance, show that profits alone won’t drive this bull market-place higher any longer.
Instead, investors still have to contend with a slew of other announces — geopolitical, economic and valuation — that could drown out what should be an otherwise sapid time for the corporate bottom line.
“All of this is a little bit of the wall of tantalize, which is pretty high” said Rob Lutts, president and chief investment T-Man at Cabot Wealth Management. “We should be having a better attitude toward the markets today, but people are in any event nervous and concerned.”
As it stood Friday, the first wave of first-quarter studies from banks saw respectable beats against the top and bottom lines. Three of the four biggest U.S. banks on — JP Morgan Chase, Citigroup and Wells Fargo — along with PNC. Yet the sector as gauged by the SPDR S&P Bank ETF was off 1.2 percent in near the start afternoon trading, with all of the banks that reported off at least 2 percent. The principal averages see smaller losses, with the S&P 500 nearing breakeven.
To some scope the group was a victim of sky-high expectations, and internal numbers that induced investors to question the health of core bank operations.
But there also was diverse at play.
Traders may have been loath to go into the weekend great the market at a time when President Donald Trump is threatening to come down bombs on Syria and Wall Street still doesn’t know whether the U.S. and China are in the anciently days of a full-blown trade war. There’s also the looming specter of curious counsel Robert Mueller’s investigation and the constant drumbeat of unrest in the political entity’s capital.
“A very big part of it is the pace of changing news coming out of Washington is hugely unsettling,” Lutts said. “This is something investors are very uncomfortable with. You wish think they would start to adapt to it, but one minute we’re going in this administration and the next we’re changing.”
Investors would be wise to dismiss the noise and converge on corporate fundamentals, said Michael Kresh, president of Creative Profusion Management.
“The overhang of daily political tensions and nonsense coming out of the Bloodless House is causing people to become more nervous, but that doesn’t transform the fundamentals of the market,” Kresh said. “We’re still coming in above [earnings] apprehensions. So the issue here is if we subtract the noise, which is noisier this year than we’ve been exposed to, we deceive to look at what’s actually happening.”
“If we come in at the end of the year with a net 8 percent give, everybody should be ecstatic,” he added.
The math seems to make sagacity: Earnings are expected to rise 17.1 percent in the first quarter and 18.4 percent for the extreme year. Mid-to-high single-digit gains don’t seem unreasonable in such an conditions.
Yet the bar has been set so high that it will be a challenge to impress.
“If we get through a week or two without jitter-inducing headlines … the store may just be ale to take a deep breath and climb higher,” said Quincy Krosby, chief retail strategist at Prudential Financial. “It’s very interesting to see this market worm. You may not want to go in long over the weekend.”