Companies are starting to report quarterly earnings for the second quarter of 2019 and if the preliminary reports are any indication, the numbers are not going to be pretty.
The main culprit for the crappy numbers is the tariffs. Unless our companies here in the U.S. raise prices, they will have to eat the tariff costs since they are the ones paying them to our government. Hence, their net incomes will drop. So far, it seems like companies have not been passing on this cost to the consumers, according to the stats coming out of the Federal Reserve.
Well, at least the timing isn’t too bad. Stocks are due for a little breather and this could be the catalyst that they have been waiting for to take a dip. But fret not, because there are some silver linings.
First, interest rates are still at historically low levels. So, after investors with itchy trading fingers sell their stocks, they’ll be coming back to buy them because there really is no other liquid investment out there better than stocks when rates are so low. Second, a year from now when the tariffs are gone (hopefully), earnings will look much better when compared to right now, so that will help boost those companies’ stock prices. This is all part of the earnings game that I talked about recently: Playing The Quarterly Earnings Game
As I always say, stick to your plan and you won’t have to worry about any of this. Hit the beach and have a great weekend!
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
