Exhausted by the conflict, the results season finally arrives

Beyond the talks to end the war, investors should keep an eye on the first-quarter corporate earnings season that has just begun.

Company stock prices tend to  reflect their earnings . If earnings rise, the stock market value of companies usually also increases, at least in the short term.

In concrete terms, if the conflict in Iran doesn’t drag on much longer, as seems likely, we’ll see the  economic cycle continue and employment remain stable.  The big unknown is inflation, which could bring unpleasant surprises in the form of price increases that raise costs for consumers (households) and businesses, as well as at least blocking potential interest rate cuts by central banks.

What to expect?

Earnings growth is expected to be  particularly strong in the United States  and emerging markets , driven by technology companies. S&P 500 earnings are projected to grow by 12%, with profits for information technology companies included in the index expected to increase by up to 44% year-on-year. For Europe, Goldman Sachs believes earnings for companies in the STOXX Europe 600 index will grow by 11%, and for those in emerging markets by 23%. This strong outlook, if it materializes, should boost stock markets, provided tensions in the Middle East do not escalate.

In the coming days, we’ll see the results of  major US banks  like JPMorgan Chase and Morgan Stanley, companies that will kick off earnings season along with Goldman Sachs (which released its results yesterday, and while the results were very positive, the share price didn’t react well and there was profit-taking). The  strength of the banking sector is a good indicator of the US economy  , and investors will be paying particular attention to margins, lending trends, and loan loss provisions.

The Dutch technology company  ASML,  which manufactures equipment used in the production of artificial intelligence (AI) chips, and Taiwan Semiconductor Manufacturing Company  (TSMC)  are also scheduled to publish their results this week. Both are crucial for  gauging the current state of the AI ​​phenomenon.

Favorable conclusion (provided that the war and the cost of energy allow it).

This time, and given that the effect of the war on confidence (consumers and businesses) has not had time to deteriorate it excessively in March, it seems that the  improvements in results that we already witnessed at the end of last year will continue, which should support the stock markets.

This partly explains why investor sentiment has begun to stabilize, discounting the possibility that the armed conflict could be heading towards its conclusion, and  is moving out of the «extreme fear» zone.

As the quarterly earnings season progresses, investors need to pay increasing  attention to specific company fundamentals , solidifying their portfolio diversification and seeking opportunities in stocks/sectors/geographic regions that can demonstrate resilience and earnings strength despite ongoing conflict uncertainty.

Data on  inflation (driven by energy dynamics) and  interest rate expectations will remain key drivers, along with oil price movements and any shifts in geopolitical tensions. Market participants will also be watching market breadth and sector rotation to confirm whether last week’s rally will continue.

Publications will intensify in the coming weeks.

In the coming weeks, investors will closely monitor corporate earnings for  signs of margin resilience , revenue growth, and future outlook, against a macroeconomic backdrop that remains uncertain.

Although volatility has decreased, markets remain sensitive to macroeconomic news and geopolitical risk. Therefore, it is worth reiterating that, despite short-term uncertainty,  maintaining a diversified and long-term investment approach  remains the most effective strategy for equity investments. In a world where complexity is marketed as sophistication and scalability is often seen as a strength, I believe that  simplicity and discipline in investment management are of paramount importance.

Don’t forget that when you don’t chase trends or try to please the majority, you can make decisions that others can’t or won’t make, and thus benefit the greater good in wealth management:  risk-adjusted returns for each investor .