It’s that time of year when we all look forward to companies’ latest quarterly figures. At this point we can share some good news – on average, S&P500 companies surprised positively in the third quarter of 2023. Surprisingly, both the number and the extent of positive surprises are above the average of the last ten years. So the prospects are good for far-sighted investors.
Most American investors should be pleased as it is the first time since the third quarter of 2022 that the ratio of earnings growth to decline is back in favor of the former. Overall, eight out of eleven sectors recorded profit increases and more than three quarters (77% to be precise) of all companies performed above expectations.
These facts paint a clear picture: Despite all the talk of economic uncertainty, the U.S. economy is actually doing better than some investors suggest. On the other hand, a current analysis shows that positive surprises are often less appreciated than negative deviations are punished – especially in small caps.
At this point I would like to give some urgent advice: stay calm! Selling quickly after a quarterly report can be fatal and lead to unnecessary losses. It is important to consider what could be the reasons for a share price fall and whether the company’s business model is still viable. You should always ask yourself whether you would still buy the stock given the new information.
S&P 500 Industrials Chart
Don’t let quarterly figures mislead you. They only provide a snapshot and not the entire picture. It makes far more sense to focus on the company’s business model, the market and its long-term development. Long-term investments in solid business models are often very successful.
Analysts are forecasting further profit growth of 5.3% for the coming Christmas quarter. With a price-earnings ratio (P/E) for the S&P500 of 17.1 – slightly below the 10-year average – and interest rates expected to fall next year, there could be a good chance that we can look forward to a successful stock market year in 2023.
See you soon,
2023-11-05 04:54:47
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