Why Investors Should Pay Attention to the Extent at Which Earnings Disappoint

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In case you've lost track of time, it's almost earnings season.

Yes, you read that right. Earnings season starts up next Tuesday, with the banks kicking Wall Street off on what could be a very disappointing earnings season.

Kenny Polcari, senior wealth strategist at SlateStone Wealth, weighed in on earnings season.

He told TheStreet that he's paying very close attention to the extent to which earnings disappoint.

With the coronavirus pandemic shutting down the U.S. economy, earnings season will give Wall Street and investors a look into how impacted companies have been by the pandemic.

And, remember, the pandemic really only shut down the U.S. in mid-March.

So, what else is on Polcari's mind? Watch the full video above for more.

Video Transcript:

Katherine Ross:
Earning season starts up next week, so what should you be watching in the markets? Joining me today is Kenny Polcari, senior wealth strategist at SlateStone Wealth. Kenny, what will you be watching next week?

Kenny Polcari:
Listen, it's going to be a very, very interesting earning season. We already started, we heard yesterday from General Electric. You've heard from some other companies already, who have indicated that it's not going to be pretty. The numbers are going to start to look ugly. I think the market's prepared for that actually. We've seen this sell-off in the market, because I think investors and the industry is prepared to see negative numbers. I think what you really have to pay attention to is, are the numbers worse than what the expectation is? Are the numbers in line with what the expectation is? Then, are any of them going to be able to give any future forward-looking guidance at all?

Kenny Polcari:
The sense is that a lot of them have already said it's almost impossible to give the forward guidance. Because it's so unclear, and there's so much uncertainty surrounding the economy, when we're going to get back to work, what this virus is ultimately going to do. Not only here in the States, but really the impact of this virus around the country. That's obviously going to affect the multinationals much more than it's going to affect maybe the smaller mid-caps in this country. One way or the other I think you have to pay attention to the extent at which the earnings disappoint. Are the disappointments bigger than what the market has already expected?

Katherine Ross:
Let's backtrack for a minute and focus in on this week. What was your biggest takeaway from this week?

Kenny Polcari:
I think yesterday's surprise announcement by the Fed that they're pumping an additional two trillion dollars into the system, buying up things that they hadn't considered before. I think the other thing was the talk already out of Congress, that they're prepared to launch another trillion dollar plus program if we need it. Certainly the Democrats are behind this fight, Nancy Pelosi, Chuck Schumer, wanting to launch more money to help more small businesses and people across the country, which I fully support.

Kenny Polcari:
I think the other thing which was very interesting, and this came up with yesterday's Fed announcement, about how they're going to pump more money, and they're being very, very creative in looking for ways to support the economy is, is the Fed ultimately going to start buying US equities, which would really be the Japanification of the United States? Because remember Japan's been doing that for a while, and yet they're still mired in a difficult time. I don't think it's the thing that the Fed should do, but the fact is it is now I think the first time that that's really been thrown on the table. I don't think they're close to it yet, but the fact that it's been thrown on the table and people are really starting to talk about what would that mean, I think that was a real surprise.

Katherine Ross:
Thank you Kenny for joining us today, and for more on the coronavirus pandemic hea

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