Keep Your Eyes on the Earnings Ball
In his Q2 update, Rana Chauhan discusses how investors are often overwhelmed by distractions that influence their decisions and suggests that they focus on corporate earnings instead.
As Rana points out, negative headlines and warnings about market crashes or overvaluations are common topics of discussion with market experts, but these concerns are typically distractions. For example, the 2023 U.S. bank failures, like Silicon Valley Bank and Signature Bank, were predicted to threaten the financial system but didn't have lasting impacts. Furthermore, historical evidence shows that markets frequently defy expert predictions. In 2014 and 2015, despite warnings of an overvalued market, the S&P 500 delivered positive returns of 13.7% and 1.4%, respectively. Similar patterns were observed in 2016 and 2019. More recently, the S&P 500 gained approximately 30% in 2020 despite economic uncertainties and trade tensions. Even in 2023, concerns about a recession did not materialize, and the markets continued their upward trend.
"...these are distractions from what truly matters: corporate earnings."
Current market fears, such as geopolitical tensions in Ukraine and Gaza and concerns about the upcoming U.S. election, are typical. However, these are distractions from what truly matters: corporate earnings. Corporate earnings are the lifeblood of any company and have a direct impact on stock prices. As earnings rise, so do markets, as evidenced by the S&P 500 Index closely tracking corporate earnings over time. Presently, corporate earnings are showing strength despite these distractions.
Therefore, rather than getting swayed by expert opinions, Rana suggests that investors focus on corporate earnings. As Warren Buffet said, “We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” By tuning out the noise and sticking to a financial plan, investors can achieve long-term financial goals.
See the video below to learn more.
If you have concerns about your portfolio or financial plan, please consult your Advisor.
