We’ve been telling subscribers that we’re cautious on stocks the last few weeks preferring lower exposure. Rising rates and tariff risk to earnings are key headwinds going into earnings season which starts next week.
Trade War Risk About To Hit Earnings?
So far the stock market has generally looked through trade war risk.
That said we’re approaching earnings season and that could change. While the news media can wiggle stocks, earnings are the ultimate driver to stocks. If tariffs hit earnings reports that drops the E in the PE and likely can hit stocks.
We’re about to lap the tax benefits in early 2018 with tariffs in 2019. That earnings benefit gets lapped with an earnings drag. That could start this earnings season by way of company guidance.
That’s real for the market but we haven’t had to face earnings reality in the market yet for tariffs.
Except for Micron
You heard what Micron said about tariffs on their earnings call in September? It was one of the reasons they dropped guidance for next quarter and the stock dropped with it.
Micron said on tariffs “we’re working on steps to mitigate that. That obviously takes some time….. It’ll be a quarter or two before we start to see some benefit from the improvement there.”
But so far there’s been no let up in the build up of threats between the US and China. Even though Micron said they expect to see benefits in a couple of quarters, we don’t really know. They just dropped margin guidance because of tariffs. We’d guess other tech companies are in the same boat.
Micron Sneak Peak On Earnings Season?
Micron reports in between others and could be a sneak peak. We’re headed to hear how the rest of tech is going to deal with earnings as earnings season starts next week.
Looking For Tech Earnings Home Runs
We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.
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We have no holdings in the stocks mentioned unless otherwise noted.