Rarely is there is a shortage of distractions for investors. The coronavirus, politics, or a presidential Tweet can grab investors' attention and wildly swing the market's pendulum between fear and greed.
That's why returning focus to the bottom line can be so refreshing.
Profits and the promise of future profits is what long-term investors count on to drive stock prices. While there is always headline risk for investors, it is the bottom line reality that matters.
The fourth quarter earnings season winds down in the week ahead. It hasn't been a great cycle for profit growth, but it may mark the first year-over-year growth in a year according to data compiled by FactSet. Corporate aggregate earnings could be up about 1%, held back by the sharp drop in profits in the energy sector. A short earnings recession may be over.
Not that the S&P 500 stock market ever doubted it would be. The index is up 21% over the past year expecting overall profit growth to return. And it has, especially for big trillion-dollar tech firms.
Microsoft, Apple and Google's parent company Alphabet are each worth more than $1 trillion. Each of them saw their earnings per share jump by double digits in the fourth quarter versus a year ago _ far outpacing the overall earnings growth of the S&P 500. And the rally in each of these three stocks has far outperformed the broader market.
No doubt there is some noise in the market _ coronavirus, anyone? However, with the quarterly earnings season quieting down, investors can take stock of this profit performance.
