Second quarter earning season is upon us and this is what I expect. I believe you there will be quite a bit of buy on the rumor sell before or on the news. What that means is that I think there will be quite a lot of profit taking in the big names that have had a great run the first half of this year. That’s why I said in a prior post it’s a good idea to take some money off the table. If you’re a long term holder it’s no big deal but I do expect a big correction in these stocks. Nothing goes up forever. (that I know of) LOL Although I expect earnings to be OK overall, I do expect additional companies to lower guidance for the 2nd half of the year. In the 1st quarter approximately 23% issued guidance for the 2nd quarter. This is historically lower than the average of 28-30%. What does that mean? It means more companies are not sure how a slowing consumer is to affect their bottom line. Additionally after the first quarter of 2024, we observe a “back-end loaded” set-up for S&P 500 companies, which are relying on a stronger second half of the calendar year to achieve their full year guidance for FY’24. In fact, 58% of the FY’24 sales growth guidance for S&P 500 companies is expected to be achieved in the second half (2H), surpassing averages from the past ten years (excluding the COVID-19 period and 2016). This could be problematic: a slowing consumer (might mean additional downward revisions) uncertainty of a Presidential election,and a market rally that is extended.
Remember: Nobody ever got hurt taking profits off the table. There will be many rainy days sometime between now and the election. It’s always a good idea to have some dry powder right at the correct buy time. And the old saying goes. Pigs get fat and hogs get slaughtered. Do you want to be the fattest pig in the pen or the slaughtered hog?