Stock Market Navigates Past Earnings Concerns, Eyeing End-of-Year Growth

The recent earnings season has turned out much better than expected for the stock market, dispelling fears of a catastrophic hit to corporate profitability that some had anticipated. This positive surprise sets a tone of optimism as we move towards the closing months of the year, suggesting that we could see a rally in stocks.

Overcoming the Earnings Hurdle

Analysts at BMO have observed that the stock market has successfully sailed past what they termed an 'earnings apocalypse' after companies reported their third-quarter results. The anticipation of this event caused concern among investors, but the reality was far from disastrous. In most cases, corporate earnings not only held up but proved resilient amidst challenging economic circumstances.

The Bull Market Continues

Brian Belski of BMO maintains a bullish stance on the market's trajectory, affirming that we are still in a bull market and suggesting that stock prices are likely to rise as the year progresses. This outlook is based on the market's strong performance at the outset of 2023, which Belski believes provides a solid foundation for enduring the year's typical ups and downs.

Underestimating Corporate Earnings

According to Belski, the market is not fully appreciating the strength of corporate earnings. Investors had initial anxieties about potentially inflated earnings estimates. However, with nearly all S&P 500 companies having reported, a significant 83% have beaten profit estimates, and earnings per share are growing, debunking the skepticism.

Setting the Stage for Growth

The confluence of positive earnings surprises, a favorable time of year, and improving market breadth, where a higher number of stocks are contributing to gains, is creating a prime environment for stock market success in the subsequent months. As we approach the end of the year, this could mean that stocks have the potential to climb higher despite any prevailing investor negativity.

earnings, bullmarket, stocks