Stock Market Insights: Overdone

DR. RICHARD BAKER, AIF®, is the founder of and an executive wealth advisor at Fervent Wealth Management. https://www.facebook.com/Dr.RichardBaker

I’m not saying my wife was a bad cook when we first married, but I am still gun-shy about ordering blackened chicken. She’s a great cook now, but in 1996 we became very familiar with the word “overdone.”

The earnings reporting season has begun; this is when publicly traded companies report their earnings over the last three months. Analysts aren’t expecting a lot of good news this time, but I wonder if the pessimism about 2023 earnings is overdone.

Companies are still struggling with slower global growth, increased expenses from inflation (bought any eggs lately?), ongoing supply chain issues, a toostrong U.S. dollar, the Ukraine war, and China being China. These things are the reasons analysts are pessimistic about the 2023 earnings.

LPL Research thinks this year’s earnings won’t be as terrible as many predict. Here are some reasons why they believe it might not be as drastic as some fear:

• China’s reopening will help fix the supply chain shortening the time to ship products to stores.

• Companies have had plenty of time to prepare if a recession happens this year.

• Business expenses are improving due to decreasing energy prices and slowing wage increases.

Hopefully, they are right, and market negativity is overdone. If so, earnings over the next year will beat the pessimistic forecasts making for a good year for stocks by year-end.

With my wife’s cooking, I learned quickly to keep my opinions to myself and let the situation work itself out, which it did. I think the same is true for earnings this year. But, again, the situation will work itself out. These companies are smart and have a lot of time to prepare.

Have a blessed week! www.FerventWM.com 2760 East Sunshine St. Springfield, MO 65804