Monday, February 8, 2021
A version of this article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET.
Companies are smashing expectations, but investors are selling the news
“Buy the rumor, sell the news,” is an old saying in the markets. Simply put, you make a trade assuming some future outcome, and when that outcome is confirmed you close out your trade.
According to the numbers during this earnings season, it looks like the “rumor” was that companies would smash expectations.
When earnings season kicked off, analysts were estimating that S&P 500 (^GSPC) earnings fell by about 9% year-over-year in Q4 2020. However, actual earnings so far have been beating estimates by such a wide margin that it looks like these companies may have actually delivered earnings growth during the period.