Nov 5, 2019
We are in the middle of earnings season and how companies report their profits (or losses) will not only be watched closely by the analysts to see if it meets their expectations, but from a big picture level, economists will be looking to see whether the results are primarily company-specific or if there are bigger forces at work.
For example: the Trade War.
This seems to be dominating the headline news and can therefore be a resourceful tool that some companies will use to explain away why maybe they are not doing as well as they could or should.
While certainly this may be a very valid reason for many companies, this is also an opportunity for some to include in their reports other “problematic” items at the same time. When global forces are impacting many companies, they may “pile up the kitchen sink” with the various other shortcomings and hope that they all fall under the Trade War excuse. The last thing a company wants to do is to issue a negative report when there’s a period of calmness as this could certainly make the front page!
For investors, high quality companies that miss their expectations might just be taking advantage of the situation so continue to have a long term focus….eventually the dishes will be done and the sink will be cleaner!
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