These Three Themes Will Rule Q2 2023 Earnings
Jul 18, 2023
The 136th edition of the Wimbledon men's final was nothing short of breathtaking. Carlos Alcaraz won his first Wimbledon title by defeating four-time defending champion Novak Djokovic in an epic tennis match that pitted a seasoned veteran against a 20-year-old star. The four-hour-and-42-minute match came down to the wire and ended in spectacular fashion.
The biggest loser of the day? Me. I had a three-legged round robin-style parlay that didn't quite make the cut. See, if Djokovic had won, then I would have had enough money to buy three sets of new Crocs. But, alas, it was not meant to be. Sports betting is a crapshoot. It is unpredictable and yet millions (like myself) continue to do it for a multitude of reasons. Why do I bet on sports? I like the action.
Speaking of action, the $10 trillion global stock rally of 2023 gets a major test over the next few weeks as hundreds of companies report second-quarter earnings. S&P 500 firms are expected to post a 9% drop in profits in Q2 which would make it the worst earnings season since 2020. As a contrarian, I would not put too much stock in that statistic, but I will be paying attention to three areas of focus that companies will likely identify on their earnings calls.
Enthusiasm for AI has boosted the Nasdaq 100 to its best first half ever. Now, traders will be looking to see if all the new applications have staying power. It has been such a banner year for tech stocks that the Nasdaq is undergoing a rebalance to address over-concentration in the index—which, arguably, was caused by the AI revolution. Look for Apple (AAPL), Nvidia (NVDA), Google parent Alphabet (GOOGL) and other tech companies to mention AI in their earnings press releases ad nauseam.
Inflation has come down in a big way since a year ago. The Fed made inflation its top target in November 2021, and the following March, they began the fastest rate-hiking campaign in history that saw 10 straight rate hikes over 15 months. As a result, companies have been placed in a conundrum as labor and other costs remain elevated while they are grappling with the decision of whether to raise prices for customers any further. So how much have rate hikes hurt? How much has disinflation helped? These are the questions companies will have to answer.
Consumers have propped up the economy for months, spurred by a strong labor market and excess savings. Now, with credit card rates as high as 22% and mortgage rates above 7%, one might wonder how long consumers can withstand these elevated levels and still function on a day-to-day basis. Additionally, if CEOs mention they are passing costs over to the consumer, that could spell trouble for this strong economy. This is a dynamic that deserves your attention.
Jermal Chandler, tastylive head of options strategy, has been in the market and trading for 20 years. He hosts Engineering the Trade, airing Monday, Tuesday, Thursday and Friday. @jermalchandler
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.