We are in the heart of earnings season, where analysts find out how well they read the pulse of different publicly traded companies during the financial crisis. But what is earnings season, and how does it affect us as investors? From a birds-eye view, earnings season is when publicly traded companies release their financials and announce their earnings based on the previous quarter’s performance. Analysts provide predictions based on these financials, along with other qualitative factors, for investors to weigh as they make their investment choices for the next quarter. If analysts’ predictions are inaccurate, the stock price could move in either direction when actual earnings are reported. But how much do these predictions affect your portfolio performance? 

Thankfully, with today’s technology, information is so readily available that analysts can make very accurate predictions. When analysts’ forecasts are significantly off, it can cause a stock to move in either direction quickly. But, there is qualitative information out there that plays just as considerably in a stock’s performance. Earnings season provides a lot more than giving insight into an individually publicly-traded company’s financial health. 

Earnings season is an excellent time for investors to decide if they are going to make a tactical change to their portfolio. Tactical changes to a portfolio can produce short-term results. Portfolio managers may find a trend across an entire industry or business sector after companies report their earnings and overweight or underweight their client’s portfolios accordingly for the next quarter. In the previous quarter, Twin Rivers overweighted large-cap global technology companies, and the largest companies in technology faired well in the last quarter’s market rebound. 

As companies report earnings over the week, we at Twin Rivers will be closely monitoring the market and our current tactical allocation. Coronavirus cases are on the rise, and governments are imposing temporary bans on indoor business activity that could disrupt entire sectors. This past April, when companies were reporting earnings after one of the worst financial crisis in market history, analysts were mostly given a pass on their predictions. But, this quarter, investors will not be so patient with analyst predictions. If markets can maintain their June high’s we could be poised to see continued strength through the current quarter. Let’s hope that is true not just for our portfolios, but for the world’s financial survival.