Be wary of upbeat stock forecasts

Investors should always take a long-term view and not be dazzled by rosy numbers

- Jeff Sommer

Streams of freshly minted quarterly earnings reports are beginning to arrive from listed companies, promising a fuller picture of how important segments of the economy fared as the stock market fell in the spring and early summer.

More important, executives are giving “guidance” to analysts on how their companies are likely to perform in the months ahead. This exercise in compulsory financial disclosure always commands attention on Wall Street.

But this is no ordinary time. Investors have been flummoxed by the unusual array of circumstances weighing down the economy. Earnings reports may have an outsize effect on short-term market movements this season, even if the information being offered is usually sanitised and meagre in substance.

Truly long-term investors – those who plan on sticking with the stock market for at least a decade and preferably longer, and who use diversified, low-cost index funds that track the whole stock market – can safely ignore these short-term fluctuations.

The report card is an assessment of an important aspect of the stock market cycle, not a specific guide to investing. But you may feel more comfortable with the day-to-day shifts in the stock market if you are aware of what is going on.

IT COULD BE WORSE

Companies like JPMorgan Chase, Netflix, Johnson & Johnson, Lockheed, Goldman Sachs, Tesla and Halliburton have already reported their revenues and earnings for the three months that ended June 30, and a host of others will do so in the next several weeks.