US Stock Markets and Earnings Influence

Published on: 10 Apr, 2018

Come April second week, the stock markets will be influenced by corporate revenues, management, and profits. This will make a break from the long-time influencers like big technology and trade tensions. The first off the block will be JP Morgan Chase on April 13 to report its first-quarter earnings. Expectations from S&P 500 are high. Benchmark companies index is reported to forecast that there has been a 17.1 percent hike in profits compared to the identical period in 2017.

A number of reasons exist as to why the investors could regard the emerging market assets as susceptible to the trade tariffs. The first and foremost reason is that an aversion to risk is practically a knee-jerk instinct. The list of other reasons includes the global trade could be hurt by trade restraints. The principal source of pain is China, a country important to the global economy. The other big reason is that the emerging markets have benefited from a weak dollar. The US dollar, however, has benefited from trade tensions.

The earnings season come at an inopportune time for the bull market. Even though S&P500 index is down by only 2.6 percent from the beginning of 2018, the swings have become much more wider and more frequent in 2018. Traders and strategists, despite volatility, point out investors have not used derivatives far more than they should be to hedge portfolios against the stock market dips. The Cboe SKEW index supports such a line of thought. This particular index is calculated utilizing the price of out of money options. It is sometimes recognized as an excellent indicator of all investors moving to protect their assets from extreme risk. The index is now down to its yearly lows. Andrew Scott of Societe Generale said that hedging activities were markedly absent. All of these means that companies are pressured to deliver.

Right now, investors have not panicked about the dispute between the United States and China which had cast a shadow over the markets during the first week of April. Lower trade barriers have benefited emerging market countries. Their GDP is largely dependent on exports. Shoaib Zafar of SYZ Asset Management said that the tensions have witnessed more rhetoric and less reality.

Even then the dispute between the United States and China has caused unease. There was a wild swing in the equity markets as news swung between soothing noises and threats of tariffs from both countries.


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Danny Abramov



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