If you've been clenching your teeth as you look at your retirement accounts and investment portfolios, brace yourself: Earnings season is here. As a brief refresher, during the last earnings season, retailers warned investors of problems with excess inventory and said inflation was eating into profits.
Markets can swing wildly during earnings season, as investors respond to results from quarterly reports. With rising inflation and fears over a recession, prepare for more warnings and concerns from corporations that can cause stocks—and your investments—to sink even more.
Stocks are falling today, ahead of earnings statements this week from companies like Delta and some of the nation's biggest banks. Look for reports from JPMorgan Chase, and Morgan Stanley, which will kick off bank earnings on Thursday, while Citi and Wells Fargo will follow on Friday. Bank earnings are expected to have taken a hit from the sharp decline in mortgage refinancing applications amid rising mortgage rates sparked by interest rate hikes by the Federal Reserve.
Concerns over inflation and a potential recession recently sent markets into what is known as "bear market" territory, meaning a drop of 20% or more from a recent high. A bear can be scary in the wild, and it's also not an animal investors typically like associated with their portfolios. Last week's strong jobs report helped soothe recession worries, but depending on how well companies performed in the second quarter of this year, earnings season could dampen that optimism.
But does this mean you should sell your stocks if earnings don't go well? The best strategy for most investors could be to use dollar-cost averaging across a diverse group of securities—that means you'll be buying more when prices are down instead of locking in losses by selling low.
And even if you pick individual stocks, this is not necessarily a time to sell. While earnings can give insight to how a company expects to perform in the near-term, any declines could be a buying opportunity if you believe that a company will perform well in the long run. And as I've written here before, if you sell your investments, you might miss any potential gains.
- Kristin
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