It was a bumpy May for stocks.
The S&P 500 posted a gain of nearly 1% this month, although sell-offs in high-tech and growth names were volatile.
Nick Colas, co-founder of DataTrek Research, says it all comes down to revenue.
“The funny thing about this year is that we’ve seen more earnings revisions than stock price movements,” Colas told The Washington City Times’s “ETF Edge” Monday. “We’ve seen an increase of 12% from earnings expectations this year … It comes down to earnings in the second and third quarters.”
Analysts polled by FactSet currently expect earnings for the S&P 500 to rise by about 60% in the second quarter from a depressed pandemic quarter last year. The big banks kick off the season when they report in mid-July.
“We think the numbers are still too low for Q2, so we should have a strong earnings season again, but that will be a tug of war until then,” said Colas.
Prepare for more volatility until the second-quarter earnings season, in mid-July, gives direction to markets, he adds.
“Expect a few more weeks of exactly what you just saw and then, as the earnings start showing, another leg up by the end of the year,” he said.
Any progress toward an infrastructure law should also boost investor sentiment, said Jay Jacobs, senior vice president and chief of research and strategy at Global X ETFs. His company’s PAVE infrastructure development ETF was launched during the 2016 presidential election and now he sees even more interest in activities in that area.
“It’s a bit ripe for disruption, if you will, with an economy still below the highest GDP,” Jacobs said in the same interview. Investors are very excited about the prospects of probably the largest infrastructure bill we’ve ever had in the United States and a fund really designed to own the winners of those kinds of bills – engineering companies, commodities, transportation companies, and heavy machinery companies. who are going to build infrastructure. “
The way forward for an infrastructure law is still unclear. Senate leader Chuck Schumer said Friday that Democrats would work on a plan with or without Republicans in June. The two parties are divided on the total cost of a proposal.