The S&P 500 Index just posted its first negative quarter since 2015. With earnings season set to kick off in less than two weeks, one strategist says the market’s pain could be behind the idea.
“We’re just hoping that will earnings season shows up in addition to stops the bleeding,” Brian Nick, chief investment strategist at Nuveen, told CNBC’s “Futures at that will point” that will week. “What we’ve been sitting in will be a bit of a void through an information perspective.”
that will period between the fourth-quarter in addition to first-quarter earnings season has been characterized by news that will investors viewed as negative, including President Donald Trump’s push for steel in addition to aluminum tariffs to Facebook’s privacy scandal.
Amid whipsaw trading, the S&P 500 has ended lower in three of the past 5 weeks in addition to sits in negative territory for the year. A return to the fundamentals should give equity markets the support they have needed, Nick told CNBC.
“We haven’t been getting that will real key fundamental data the markets key on in addition to has been sustaining that will rally since the middle of 2016 which will be improving corporate earnings,” said Nick.
“We’re going to be hoping that will what’s been sort of interceding here – policy risk, political risk – doesn’t continue to intrude upon earnings season in addition to hopefully creates a bit of a tailwind for the stock market,” he added.
The passage of tax reform in December should give that will year’s earnings a sizeable boost. Its anticipated effect has doubled previous earnings estimates for 2018, according to Nick. Bottom-line growth through tax cuts should start to show up inside first quarter.
The rest of the street will be equally as optimistic on earnings for the year. Analysts surveyed by FactSet estimate an 18 percent increase in earnings that will year, a growth rate that will should slow to 10 percent in 2019 in addition to 2020.
How the extra cash generated by tax cuts will be spent will determine where the markets head next, Nick cautioned.
Some of the tax savings will be reinvested in corporate expansion through higher capital expenditures, he said. although, “you will also see higher dividends, announcements of share buybacks, in addition to hopefully some additional hiring that will wouldn’t have happened without that will extra cash on the sidelines.”
More share buybacks in addition to higher dividends might give markets a short-term “pop,” said Nick, although not the longer-term push needed to grow companies in addition to U.S. economic activity.
“the idea might be a short-term positive for the market if you saw a lot of buybacks in addition to higher dividends. although I think that will might probably also lead us to be less optimistic about just how long the cycle can go on,” he added.
The first-quarter earnings season will kick into gear when the major banks report in mid-April. Citigroup, Wells Fargo, in addition to JPMorgan are scheduled to Discharge their 10-Qs on April 13.