Redrick Terry:
4 Your Money time now. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thanks, Redrick, appreciate it.
Redrick Terry:
Of course. So we’re well into the earning season for the release of quarter three 2019. What are the highlights of them so far?
David Nelson:
The highlights seem to be that most companies have exceeded as far as projections. And we have to take that with a grain of salt because the way that Wall Street, the games that are played there, is we start with analysts estimates at a fairly high level, and then as it gets closer and closer to reporting time those numbers seem to come down.
David Nelson:
So, ironically most companies are exceeding as far as the projections. If we looked at the first number that was out there, they didn’t exceed, but now the lower ones we are exceeding. It’s a game that’s played by Wall Street. We’re not a big fan of it by any stretch of the imagination, but overall things are still fairly solid as far as earnings from companies out there reporting.
Redrick Terry:
It seems like that type of thing dominates headlines several times of year. So why are the earnings so important?
David Nelson:
Well what people buy when they invest in a stock, we’ve got a great chart here that’ll kind of visually illustrate it, but what they’re buying is a future earnings. And so when we look at earnings on the bottom and we look at the S&P 500 on the top, what you see is a very similar pattern, and that is when earnings are up, generally speaking, stocks are up and vice versa.
David Nelson:
Now the interesting thing about this, and this again we’ve talked about in the past, is that the stock market leads as far as, as crazy as it sounds, leads the earnings. And so stocks have a tendency to roll over before this rolls over and take off before this takes off. It’s just the way that it works. And again, if we look at this down here, as far as earnings as a whole, what we find is that earnings have actually been pretty good, but again, not necessarily as high as what were anticipated, say six months ago.
Redrick Terry:
Certainly. So as the rest of the companies begin to report, what does that mean for the rest of the people out here?
David Nelson:
I would assume probably very similar results that we’re going to see companies reporting and having pretty good numbers. What we’re interested in is forward looking earnings as far as what’s ahead, and we want to look at that and try to gauge that as far as, again, that typically is going to be very, very important when it comes to what stocks are going to do. So that’s probably the biggest item. Again, individuals that are investing today should be aware that the risks have increased pretty dramatically as we saw earlier in the chart. Prices are up significantly and it’s a time probably to be a little cautious as far as right now.
Redrick Terry:
Certainly, David. Thanks so much.
David Nelson:
Thanks, Redrick.
Redrick Terry:
We appriciate it. And if you missed any part of our discussion, we’ll put it on our website for you, OurQuadCities.com.
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