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As we approach each of the moments in our lives, our point of view, at that moment, can influence whether we are pessimistic (see the glass as half empty) or optimistic (see the glass as half full) about the situation. These days, it is easy to see the bad in our world and get pessimistic. Spend five minutes watching the news, and viewing the glass as half empty makes a lot of sense. The world is filled with overwhelming challenges and problems.
However, despite and, to a degree, because of these troubles, opportunities are out there. When it comes to investing, our team attempts to emulate the “half full” mindset of the Apostle Paul.
“I am not saying this because I am in need, for I have learned to be content whatever the circumstances. I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do all this through him who gives me strength.” Philippians 4:11-13
No matter what the economy and markets throw our way, we strive to be content with the circumstances and make the best of them. When it comes to second-quarter earnings season for the stock market, most analysts have seen the glass as half empty. We all know that the second quarter was filled with corporate shutdowns, fewer sales, less revenue, and, of course, lower earnings for most companies. This has led to a pessimistic outlook.
A number of companies, however, have been reporting second-quarter earnings that were better than expected. Our team has spent time seeking out these types of companies…and there are many out there. It should not be too surprising that several companies have been posting positive earnings surprises, because far too many analysts had been far too pessimistic on their outlook for the second-quarter earnings season. In fact, the consensus for the second quarter was that S&P 500 earnings would drop by 44% relative to the second quarter of 2019.
Where we see the glass half full is in our efforts to find companies that did better than expected, and more importantly, have raised their future earnings expectations. Finding these types of companies in 2020 has been a challenge, but a worthwhile endeavor, to say the least. Investing in these kinds of companies will continue to be a key to our success for the final two quarters of 2020.
As we have mentioned, Wall Street has become much more focused on quality, and the path forward is becoming much narrower. This flight to quality will lead many investors to flock toward the types of companies we already own: earnings winners and market leaders.
Like Paul, we are content with making the best of the situation, no matter how seemingly perilous. We know the markets will have good and bad days ahead. Our team is here for you, ready to face any troubles that come our way, and ready to look for solutions to overcome the challenges we may face. Despite all the turmoil in the economy and markets, we still see the glass as half full.
Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights
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