(Please enjoy this updated version of my weekly commentary from the Reitmeister Total Return newsletter).

Everything we have discussed about the market the past two months remains the same. That being the illusion of the conservative stocks in the S&P 500 making new highs as the overall market is actually in Risk Off mode with most groups seeing stiff corrections. Unfortunately that situation is unchanged.

Instead, let’s turn our attention to Q2 earnings season because it is important to appreciate the early trends as we enter the heart of earnings season. This is especially true as nearly all our portfolio reports in the next couple weeks so we will want to be prepared for what is likely to come next.

Market Commentary

Long story short, this looks like another spectacular earnings season. Here are some of the key stats as gathered this morning by industry friend, Nick Raich of EarningsScout.com.

• In total, 152 companies in the index have now reported 2Q 2021 results.
• 89% have exceeded their EPS estimates, on average, by +18.93%.
• Collectively, 2Q 2021 EPS is up +102.85% over 2Q 2020 for these 152 companies.
• 86% have topped sales estimates, on average, by +4.40%.

The above is pretty spectacular. Not just the percentage of companies beating estimates. But also the magnitude of the beats on both the top and bottom line.

Then you have the notion that we have enjoyed a string of strong earnings seasons in a row. This leads to elevated expectations which at times can be harder and harder to topple. So that makes the percentage and magnitude of the beats that much more impressive.

Now let’s look at the strength of this earnings season from another perspective. That is the change in EPS growth expectations for the S&P 500 over time. As you will see below that all year long estimates came higher for Q2. Yet as the actual reports came in the earnings growth projections rolled higher. Not just for this quarter, but for the next 3 quarters as well.

The sum total of above is that Wall Street expects the good times for earnings to continue. And since earnings growth is the main catalyst for share price advances, then it bodes well for the future of this bull market. Thus, any notion that the recent pause in stock prices has to do with worries about the outlook for the economy or corporate earnings is complete nonsense.

And yes, these estimates are rolling higher even as the Delta variant picks up speed with more cases popping up on a daily basis. Yet as I shared last week, I do not believe this will prove to change the mid to long term trajectory of the economy or market. Here is that section again:

“I don’t believe the Delta variant will truly hamper the economy to any significant degree. That is because the rate of vaccination in the US is very high. And really the main issue with Delta is for those who have not been vaccinated. Thus, I expect this to lead more folks to get the vaccine.

Also most state and local governments realize after the first go around with Covid, that the cost of shutdowns to society is far too high. This should make it easier to greatly limit shutdowns to the entire population when only a minority of them are effected. And thus we do not have the makings worthy of a serious market sell off.”

All of this news foreshadows strong results for our 12 stocks set to report earnings this quarter. Almost all of that activity to take place between tomorrow morning and next week Thursday 8/5. (Update: The first stock report is in with an impressive beat and raise with shares sprinting higher. Hopefully positive foreshadowing of how the other 11 stocks in the portfolio will do this quarter).

However, let me make something perfectly clear. NO ONE escapes earnings season totally unscathed. Even if you avoid the pain of an outright miss, you can still have stocks that don’t respond well to the report. Or analysts see glimpses that the future may not be as bright and estimates head lower crushing the stock price.

The point being that the POWR Ratings is a truly stellar tool to put the odds of earnings season in our favor. But even still you cannot expect perfection as typically 20-30% of the stocks will need to be jettisoned from the portfolio and replaced with stocks whose futures are brighter. Gladly if the other 70-80% outperform then you will enjoy results well ahead of the pack.

Normally I recount the details of the economic calendar as well. However that is getting boring these days as it truly has been nearly a year since declining economic activity. So let’s simplify the discussion by saying all the reports the past week speak to economic growth.

The only event that deserves some conversation is the Fed’s rate decision tomorrow. No, I do not expect them to raise rates just yet. However, they very well could start to change their language about inflation which signals higher rates ahead. So let’s keep a close eye on that event as it would have ripple effects for the market and some of our direct trades on rates.

What To Do Next?

The Reitmeister Total Return portfolio has outperformed the market by a wide margin this year.

Why such a strong outperformance?

Because I hand-pick the very best stocks from across the POWR Ratings universe. In fact right now there are 12 Buy rated stocks and 2 ETFs in the portfolio ready to excel in the days and weeks ahead.

If you would like to see the current portfolio, then start a 30 day trial by clicking the link below.

About Reitmeister Total Return newsletter & 30 Day Trial

Wishing you a world of investment success!

Steve Reitmeister

…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

SPY shares were trading at $439.35 per share on Wednesday morning, up $0.34 (+0.08%). Year-to-date, SPY has gained 18.28%, versus a % rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...

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