Write-offs. Corporations will revalue assets with the possibility of companies taking fervent stances on writing off assets and taking losses. This may occur en masse either systemically or by sectors depending on business conditions.
Guidance. Typically, first earnings season is a time when companies provide guidance for the first quarter and for the year. It is noted that this time around the estimates will be so-so at best and well below expectations. If a company goes with a no-guidance policy then expect a negative short-term reaction in stock prices.
Margins matter. Don’t gloss over profit margins this earnings season. Retail margins are expected to decline after unenthusiastic holiday sales. Commodity prices have dropped and companies that rely on commodities for product inputs will benefit and their margins are expected to grow.
Anticipate which companies will cut back on dividends, have positive or negative margin growth, and state write-offs or layoffs.
- WisdomTree Total Earnings Fund (EXT): down 6% year-to-date. This fund measures the performance of earnings-weighted companies in the United States.