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Get ready for a stellar earnings season

Myles Udland
Markets Reporter

NOTE: An earlier version of this story appeared in Myles Udland’s post previewing the day ahead.

First quarter earnings season is set to kick off this week. And the news is going to be great.

In a note to clients published Monday, Jonathan Golub and the equity strategy team at Credit Suisse said first quarter earnings are likely to grow 15.5% over the prior year excluding the benefits from tax reform. Including assumed tax benefits, consensus expectations for earnings per share in the first quarter is for an 18.3% increase over last year.

Earnings are going up.

And this comes after we reported on data from FactSet late last month which showed the change in expectations for annual earnings per share growth during the first three months of the year was the largest in at least 15 years.

Yet this good news about corporate America seems unlikely to be enough to get the choppy stock market moving up and to the right again.

Of course, the first risk to markets that many investors will think of right now is a trade war. Analysts at Goldman Sachs said on Friday, however, that, “trade tensions represent a minimal risk to S&P 500 earnings in aggregate.”

As we’ve noted before, work out of Bank of America Merrill Lynch published earlier this year showed that strong earnings performance often comes in years when the market finishes in the red.

This shows that expected earnings are more important to investors than realized earnings. The expectations of 2017, then, were a more useful stock price signal than the strong earnings results that are likely to be reported over the balance of 2018.

Good news today, then, is less important than anticipated good news tomorrow when it comes to higher stock prices.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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