Earnings season, not central banks, will now drive markets

With central banks beginning to lower interest rates, earnings season will be a primary driver of stock markets, affirms the CEO of one of the world’s largest independent financial advisory and asset management organizations.

Nigel Green of deVere Group is weighing in ahead of the critical reporting season which moves up a gear next week and as US futures dipped on Wednesday morning as Wall Street seems on track to extend its impressive September gains.

“As the Federal Reserve, and its global central bank peers, shift gears by lowering interest rates, the spotlight is turning to the broader economy, raising the stakes for the upcoming Q3 earnings season,” he says.

“Investors are now eagerly awaiting company reports that will provide crucial insights into how key businesses are doing.

“With the recent rate cuts signaling concerns about economic growth, corporate performance and guidance will play a critical role in shaping market sentiment and investment strategies in the coming months.”

This move has shifted investor focus from the central bank’s actions to the overall health of the economy.

“As interest rates drop, the effectiveness of this monetary easing in stimulating growth and sustaining corporate profitability becomes a key concern for market participants,” notes the deVere CEO.

While the rate cut provides some relief from borrowing costs, it also indicates that the economic outlook may be less robust than previously thought.

This has raised the importance of corporate earnings reports as investors seek tangible data on how companies are coping with challenges such as changing consumer demand.

Nigel Green continues: “Beyond the top-line and bottom-line numbers, the commentary from corporate leaders will be particularly telling. Executives’ perspectives on demand trends, cost pressures, and strategic adjustments will provide deeper insights into the business climate and potential growth opportunities or pitfalls.”

As the Q3 earnings season ramps up, it is likely to bring increased market volatility.

“Unexpected earnings results or cautious forward guidance is going to trigger sharp market moves, particularly in sectors most sensitive to economic changes, consumer discretionary, financials, and industrials. Investors should be prepared for a period of heightened activity and adjust their strategies accordingly,” he confirms.

Financials and consumer goods companies typically report early, followed by tech and industrial firms.

The deVere Group CEO concludes: “This earnings season will be the true barometer of economic health.

“As companies report their results, the narratives they share will carry more weight than any central bank policy change.

“The earnings we see in the coming weeks will not only illuminate the resilience of businesses, but also provide crucial insights for investors facing this transitional phase.”

About deVere Group

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of offices around the world, more than 80,000 clients, and $12bn under advisement.