Company earnings reports are a good way to get a more detailed sense of the direction of the economy. Last week, companies began reporting their results for the July to September period. A number of major banks have already announced strong reports, with Bank of America, JPMorgan, Wells Fargo and Citibank all either meeting or surpassing Wall Street analysts’ expectations. Many more companies will report results this week.
Investors will be paying close attention to how companies describe the impact of trade tariffs on their operations. About 10% of large U.S. companies mentioned tariff concerns when they reported their April to June earnings three months ago.
Investors will be keen to learn if trade concerns have become more widespread in recent months. If companies report significant concerns about trade, it could lead to renewed fears about tariffs in the market, as it would suggest that the trade restrictions are slowing the economy. Conversely, if companies report that tariffs are not having a significant impact, that would help calm investors and help them focus on the strong economic and company results we have seen so far in 2018. Indeed, company earnings have grown 11% on average in 2018 (see chart).
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