Earnings season:the fate of the US stock market is being decided

The US stock market continues to drift in 2018. The Dow Jones index is locked in the range of 23400-25400. There is nothing terrible in this pause except for the fact that it can not last forever, and sooner or later one will have to leave the range. For this, of course, you need a serious fundamental reason. In July, this may be the earnings season in the US.

Recall, recently, it was the financial results of US companies that provided serious support to the US stock market and did not allow indexes to decline. The past reporting season in the US was simply magnificent: over 80% of the reporting companies of the SP500 index exceeded forecasts of analysts. On average, the excess of earnings forecasts was 7.85%. This is the best result in history.

For the current season of reporting, analysts also look with optimism. As expected, revenues of companies included in the index basket S & P 500, will grow by 20% compared to last year. This is only slightly less than the growth of 23%, demonstrated during the period January-March 2018 (which was the highest growth rate in the last 7 years).

We draw your attention to the fact that analysts generate a positive even although the times are now troubled. Investors are afraid of trade wars and their consequences. But to say for sure what they will lead, no one can yet. In addition, the strengthening of the dollar recently eats the margin of American corporations. But, as you can see, analysts do not bother.

Nevertheless, nervousness in the financial markets is growing. Therefore, it is important to look not only at the current financial results of companies, but also on their forecasts. Now they are more important than ever. If the companies continue to radiate optimism and predict growth of activity, the stock market should not have problems.

Otherwise, the current decline in the US stock market on the eve of the launch of the earnings season is a good opportunity for cheaper purchases. Purchases are relevant, while the Dow Jones Index is above 23400, that is, till the lower bound of the range is holding - it does not allow the downward movement to gain strength and form a local trend. As for the goals, the minimum is the upper limit of the range - 25400, but in case of successful reporting, it may well be broken.