Ritholtz: Corporate earnings show no sign of turnaround

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• After a positive start to earnings season, corporate results for the first three months of 2018 have given Wall Street analysts no reason to breathe a sigh of relief.

• They’re expecting more sluggish earnings growth, with the consensus expectation at 3.2%. Analysts are hesitant to say it publicly. But they’re also not optimistic about the potential for strong gains.

• In January, earnings growth for the four quarters starting with the fourth quarter of 2017 was just 2.3%.

• The outlook got even grimmer after the average analyst projection for the first quarter of 2018 dropped another 0.3 percentage points, to just 2.5%.

• There’s a “surprisingly profound shift” in the way investors are interpreting corporate results, John Butters, senior earnings analyst at FactSet, says.

• That’s because they’re looking past some promising areas, such as soaring mortgage refinance activity, to “fragile” areas, like revenue from continued product sales declines in steel and aluminum.

• Also, Butters says investors are uncertain about how much of a role monetary policy will play in boosting the economy, leading them to show greater caution.

In fact, the biggest surprise of earnings season is what investors have been focusing on instead of earnings. Last week, when all eyes were on company results, major indices finished nearly flat. That tells us investors aren’t yet convinced that this quarter’s results will lead to an inflection point in the bull market.

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