Earnings season is repeating a tech-bubble trend filled with counterintuitive market reactions, Bank of America says | Markets Insider

data. The figure also represents the strongest second-week earnings performance in data going back to late 2011.

Yet the market has been rife with"perverse reactions" to the largely encouraging reports, the bank's analysts said. Earnings beats this season have underperformed the S&P 500 by 0.05 percentage points, the worst in history. Conversely, earnings misses are, on average, outperforming by 0.6 percentage points, the highest in history.

The reactions"smack of the tech bubble," the only other period with a similar degree of awkward post-earnings price swings, the team led by Savita Subramanian said. The market famously slumped after the unconventional earnings season, suggesting today's trend may be a"harbinger of a market dip," they added.A fund manager overseeing $34 billion says a Biden-led blue wave will jolt the US economy out of stagnant growth.

The analysts peg the atypical reactions to most earnings news already being priced in. Alpha from beats sits at 63%, signaling that macroeconomic factors and the upcoming presidential election overshadowed better-than-expected earnings, according to Bank of America. Macro trends aside, companies guided for an extraordinarily encouraging end of the year. Bank of America's three-month guidance ratio, which tracks bullish versus bearish forecasts, climbed to a record 3.8x through the week. Its three-month earnings revision ratio leaped to its highest level since 2018. The share of above-consensus guidance reached its highest point in a decade, a stark reversal from recent quarters' lack of formal estimates.

It’s literally a tech bubble every year since 2013

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