Earnings Fail to Impress

Source: JPM, Unigestion, as of 3 November 2021. Median 1-day performance versus market

Overall, equity markets rallied further in the period from the first day of Q3 earnings reporting up to the Fed meeting in early November. However, market action suggests that investors have not been so impressed by the results and other drivers are pushing equity markets higher. Today’s chart compares the median 1-day price return (relative to the market) of firms that beat their EPS estimates versus those that missed for both the S&P 500 and Stoxx 600. As the chart shows, firms who beat estimates were not rewarded nearly to the same degree that firms missing were punished. This asymmetry suggests that investors were likely more optimistic than analysts.

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