Contrarian Indicators
Macro Perspectives
It's a big earnings week.
As we discussed coming into this earnings season, expectations have been dialed down - that creates an opportunity positive surprises.
With that, coming off of a major shock and potential broad threat to banks last month, the first hurdle to clear, in this Q1 earnings season, was the big banks. That was done successfully - the big banks posted big earnings beats, even AFTER adding to their respective war-chests of loan loss reserves.
We've since heard from the, perceived-to-be, more "at-risk" regional banks - including those that share the threatening combination of high uninsured deposits and large duration risk (characteristics akin to the bank failures of last month). The good news: We've seen a fair share of earnings beats in those reports, and cases of muted or successfully tamed deposit flight.
Overall, better than half of the companies that have reported in the financial sector have beat earnings estimates, thus far.
More broadly, in quarter where the bar was set very low for earnings expectations, 76% of S&P 500 companies that reported as of Friday had beaten expectations.
That said, this week, we'll hear from big tech companies, along with broader corporate America.
Keep in mind, these earnings are from a quarter that the Atlanta Fed continues to project GREWÂ at a 2.5% annualized rate. That's in contrast to Wall Street's expectations for a 6.7% contraction in earnings for S&P 500 companies - which would be the biggest decline since the depths of the covid shutdown.
With this setup, we enter the heart of earnings season with sentiment readings leaning bearish. Speculators are net short S&Ps at levels not seen since October 2011 (when the European sovereign debt markets were in crisis). And the Bank of America global fund manager survey shows most bearish on stocks, relative to bonds, since 2009.
These tend to be contrarian indicators.
