Key Points
• Just as the number of marathon finishers surges then drops off as each half-hour mark passes, the surge in the level of earnings estimates often drops off after each quarter ends.
• The return of earnings growth is a key factor in getting global stocks to move materially higher.
• Successful long-term investing is like a marathon since investors must be prepared, disciplined, able to overcome setbacks, and focused on their goal in order to be successful.
The 120th Boston Marathon takes place today, as the first quarter earnings season starts in earnest with 7% of companies in the MSCI All Country World Index scheduled to report this week.
After falling for most of the first quarter, expectations for earnings per share over the next twelve months’ earnings have been revised higher in recent weeks for the stocks in the MSCI EAFE Index (which measures developed economies excluding the United States). While that is welcome news, it might not last. The earnings season can be like finishing a marathon. Just as the number of marathon finishers surges then drops off as each half hour mark passes, the surge in earnings estimates often drops off after each quarter ends. The charts below illustrate the pattern in marathon finishes mirrored in the earnings expectations for the MSCI EAFE Index over the past year.
Jeffrey Kleintop is senior vice president and chief global investment strategist at Charles Schwab & Co.
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