The S&P 500 gained 1.6% this week as stocks reporting earnings continued to get bid higher. Based on stock performance this earnings season, investors got way too bearish leading up to the start of the Q4 reporting period in early January. With reports not coming in as bad as expected, there has been a rush to buy stocks that beat estimates. At the same time, stocks that have missed estimates have not been getting hit that hard. So far this year, stocks that have beaten EPS estimates have gained 2.64% on their earnings reaction days, while stocks that have missed EPS estimates have only fallen 1.92%. Normally, stocks that beat EPS only gain 1.9% on their earnings reaction day, while stocks that miss EPS normally fall ~3.5%. This year has been a huge outlier so far, but eventually we’ll see mean reversion back towards the long-term averages. Enjoy the earnings strength while it lasts!
Along with in-depth earnings season coverage, there’s a lot more to discuss this week after the Fed’s rate decision on Wednesday and Friday’s blockbuster non-farm payrolls number. We cover everything you need to know as an investor in this week’s Bespoke Report newsletter. To read the Bespoke Report and access everything else Bespoke’s research platform has to offer, start a two-week free trial to one of our three membership levels. You won’t be disappointed! Have a great Super Bowl weekend.