Bank of America strategist Savita Subramanian says there are a lot of reasons to anticipate a very positive round of company earnings in the coming weeks.
She also says that actively managed hedge funds are collectively underweighting the stocks, and if that changes, it could contribute to a rally after earnings.Pleasant surprises have been hard to find in 2020, but it looks like the third-quarter earnings period is going to be one of them. "The ratio of upward to downward guidance over the last three months increased sharply to 3.3x, a record high in our data history since 2000," she said.
In broad terms, S&P 500 company earnings are almost always better than analysts expect. One reason is that Wall Street tends to lower its expectations as earnings draw nearer. But Subramanian says that's actually not happening this time. Expectations are rising, and that could mean the usual beats will get a more enthusiastic response.
I wouldn’t. Over the past month, company growth and beating earnings expectations have failed to boost stocks. The market is being held hostage by stimulus talks. Wall Street is essentially a big zombie company, and Treasury/Pelosi is Robinhood.
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