As we wrap-up PLAYOFFS SEASON, along comes earnings season. It never stops. 2015 has already proved a roller coaster ride on Wall Street but the year is young and active. When emotions run high, we resort to facts and logic for the best decision-making. Earnings season is the time to take the pulse of Corporate America and the overall Market.  It’s playoff time on Wall Street, and the stakes are high.

 It’s very, very early but despite some high profile disappointments, earnings have come in ahead of expectations as a whole.  37 of the S&P 500 companies have reported, representing 7% of the total.  Almost all of them have beaten earnings estimates, and 60% beat on revenues.  Not too shabby.

The first week of earnings is always led by the Financial companies.  So far, they’ve disappointed.  Low rates and high legal bills continue to plague the big banks.  We’ve maintained a very low exposure to Financials for years now, but see that changing this year.  We see brighter days ahead for the Banks.  We’re just not there yet.  Industrials fit this perspective as well.  For this round, Financials and Industrials take the defeat in the Earnings playoffs.

Consumer companies are tracking ahead of estimates, which shouldn’t surprise much, as lower gas prices mean more money in pockets to spend elsewhere.  Tech has also been a beneficiary of increased spending.  So after Week 1, Consumers and Tech beat Financials and Industrials.

What is most important this time around for earnings season is the outlook.  Earnings are history.  The Market is forward looking.  Low interest rates and cheaper energy are a great combo for the US economy.  But it can come with a cost.  These ingredients tend to come when economic data slows.  That has certainly been the case overseas. So far, the US engine has been humming along.  We seek to find out if it continues.  Stay tuned.

This weekend is all about playoffs on the gridiron. Since the Niners are spending the playoffs at home, we at BFIC are pulling for Cal’s own Aaron Rodgers and the Green Bay Packers.

By: Mike Frazier

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