What Do the Earnings Season Numbers Mean?

It’s very early in the current earnings season, but, so far, the numbers haven’t been too bad. In fact, quite a few Dow companies reported first quarter earnings that beat consensus estimates.

Many corporate outlooks that have been reported are not too shabby either, which is helping investor sentiment in the broader stock market considerably.

The stock market really needed an earnings season to begin because it was stuck in a rut in the first quarter. The market couldn’t seem to get past all the bad news being reported. Any good news was met with indifference.

Right now, investor sentiment is improving, but it’s hard to figure out how long this will last. After the first quarter earnings season is finished, my best guess is that the market will go back to worrying excessively.

It’s possible that the stock market is rallying now because the numbers so far haven’t been as bad as the market had previouslyworried they would be. This is not a good way to look at things, and I wonder how a stock market can go up when the underlying economy is in a funk.

The real estate price cycle always takes longer than other components of the economy and so the current state of the real estate market could be unchanged for many years to come. And, as if there wasn’t enough to worry about already, inflation remains a dangerous threat that could create the next depression.

If inflation comes into the economy at higher rates in a sustained manner, the only way the Federal Reserve can fight it is to increase interest rates, which would kill the current stimulus that’s trying to jumpstart the economy. However things develop in the future, I think it’s going to be a difficult period for the next decade or so.