Did business optimism turn into real results? We're about to find out as we enter the most anticipated earnings season in six years:
Bottom Line: We're at the onset of the 2nd quarter earnings season. It's easily the most anticpated in years for two specific reasons. First, all business optimism metrics were at decade plus highs throughout most of the 1st quarter. So did all of that optimism turn into actual results? Second, heading into earnings season - expectations are running extremely high for improved profits. The average improvement in corporate earnings is anticipated to be 10.4%! That double digit improvement in corporate earnings would be the best performance in six years if it occurred.
Given the lofty levels of stock prices, we'll need to see meaningful earnings improvement to help justify prices. So 10.4% is the magic number. If earnings come in above that figure - we'll likely see upward revisions going forward with potentially higher stock prices to follow. If we fall short of that figure - we could see the inverse occur. How real was the Trump bump in the 1st quarter? We're about to find out.