For institutional investors in Norway

Earnings Don’t Matter… At Least Here in the U.S.

Ticker Numbers Stree
Suny Park, CFA, CPA

Suny Park, CFA, CPA

Head of Institutional Client Strategy, North America


24 Jan 2022

It is said, “stocks prices follow earnings.” Suny Park, Head of Institutional Client Strategy, discusses why this isn’t currently the case and what investors should consider as a result.

Key takeaways

  • It is said, “stocks prices follow earnings;” however, as many frustrated quality or growth-at-a-reasonable price portfolio managers will attest the broad US equity indices have turned this adage on its head.
  • The weight of non-earners has steadily increased from about 20% in September 2016 to about 37% of the Russell 2000 Index at the end of September 2021.
  • Despite generating positive absolute returns, as long as stock price momentum remains disconnected from the underlying earnings and cash flow growth, actively managed quality or growth-at-a-reasonable price portfolios may continue to underperform their respective benchmarks.

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Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

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