Another Earnings Season

The Bull and his partners have often said that earnings are the core factor for setting stock prices. Higher earnings lead to higher value for the company producing them. It is really that simple. This past quarter, analysts expect that the S&P 500 companies will post earnings about 19 percent higher than in the same period last year. This, more than anything else, explains why the stock market has recovered so well after the shock at the outset of the Iran war.

The United States’ economy is well insulated from the impacts of this latest war. We are a net exporter of oil and gas. We have plenty. The greatest impact is that oil prices are set internationally. Therefore, these prices are higher for us, too. But, in real terms, this has much less impact than with previous energy price shocks. We can handle this!

Leadership in our stock market continues to rotate. The accent has been on value stocks since last fall. Lately, leadership has shifted back to growth names. It may be that many of these growth companies are relatively immune to higher energy prices. Investors have witnessed shifts back and forth from growth to value for some time now. We expect more of the same. When energy prices decline, don’t be surprised if value reemerges. This is why the Bull and his partners have integrated a greater balance between the two styles in portfolios. Stay steady my friends.