Earnings Beats Ain’t What They Used to Be

At CNBC, Alex Rosenberg notes that companies beating earnings aren’t getting the love they used to:

“One possibility is that this far in the cycle, investors understand company fundamentals well enough that surprises aren’t really surprising,” Convergex chief market strategist Nicholas Colas told CNBC.

In other words, investors don’t need to be convinced that a company is able to operate profitably, and the questions answered by a given earnings report are thus less consequential than they used to be.

A similar argument can be made about momentum stocks, according to Eddy Elfenbein, author of the “Crossing Wall Street” blog.

“One of the few areas that have been working consistently has been momentum stocks like biotech and online retail names,” Elfenbein wrote recently. “That’s the sign of an aging bull, and I think the reaction to earnings beliefs reflects the thought that the ceiling is close for momentum.”

So at the same time moderate growth is less noteworthy, fast growth isn’t quite as impressive as it used to be, either. Investors figure that it won’t last forever.

Posted by on August 3rd, 2015 at 2:09 pm


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