St James Place : Dialling down

One of the drawbacks of stock market regulations is the unintended effects they can have on prices, and even on corporate practice. Nowhere is this more pronounced than in the obligation for companies to publish quarterly reports, which provide an impetus for companies to prioritise short-term performance. In order to add a gloss to their results, they often resort to dialling down expectations ahead of earnings season.

Companies have had to do plenty of dialling down in recent weeks. Earnings season is now well underway, and the news is not good. Earnings of S&P 500 companies are thought to be down by around 8% in the first quarter, despite the fact that an unusually high number of S&P 500 companies have been buying back shares in recent months, precisely because it gives their earnings numbers a boost. The numbers are even worse in Europe, where first-quarter profits are expected to fall by 19% compared to a year earlier, according to Thomson Reuters.

This week's bulletin also includes:

• Corporate earnings season in the US was mostly negative, but it was worse in Europe
• Among technology stocks, Apple struggled, but Facebook and Amazon posted strong profits
• Central bankers in the US and Japan chose to leave rates on hold
• Eurozone growth in the first quarter exceeded that of the US, UK or the broader European Union

View this week's Market Bulletin, which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.