The second quarter of 2020 saw the sharpest intra-quarter downward revision to earnings since 2009 (-17.5%). This is set to be followed by one of the largest upward revisions over the period, as we enter the third quarter earnings season with analysts recalibrating earnings estimates to rebound faster than expected.
Does this mean anything for forward returns? Although there is a modest negative relationship, the coefficient is statistically insignificant and the last time we saw earnings upgrades at this pace, the S&P 500 rose 3.2% and 5.0% respectively in the following quarter. Still, this is a metric worth following, as it indicates that the medium-term macro outlook continues to improve.
Source: Bloomberg, Voya Investment Management
Voya Investment Management has prepared this commentary for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. Past performance is no guarantee of future returns.
The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Strategy holdings are fluid and are subject to daily change based on market conditions and other factors.