Caution: It's Earnings Season, And The Market Has Very High Expectations

Summary

  • Market expectations are extremely high, as shown by lofty forward P/E ratios; stocks are priced for earnings to exceed already ambitious forecasts.
  • I strongly advise against aggressive buying at current highs—trim expensive positions, keep cash on hand, and avoid margin to manage risk.
  • Earnings season could trigger a correction if results or guidance disappoint; inflation data may also impact sentiment and spark selling.
  • Maintain discipline: trim winners, hold cash for buying opportunities, and be ready to act if panic selling emerges, especially in popular growth names.
  • This idea was discussed in more depth with members of my private investing community, Group Mind Investing. Learn More »

Little girl running and catching butterflies with a net

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What makes me say that the market has high expectations? Look at the Forward P/E

That means, how many times does the expected future earnings need to be multiplied to meet the current stock price? The expected

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This article was written by

30.93K Followers

David H. Lerner is an analyst with a decade of experience utilizing his professional background in software consulting and technology to identify market trends and provide long and short trade ideas. David employs a combination of technical analysis and market psychology to capitalize on narratives for outsized returns. He also utilizes “Cash Management Discipline,” a simple trading style to hedge against the volatility of today’s market climate.

He leads the investing group Group Mind Investing where he uncovers actionable trading and investing ideas nearly every day. Other features include: long and short swing trade alerts, daily macro analysis, weekly articles, and chat for community interaction and questions. Learn More.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SOFI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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