Why Investors Are Watching the Wrong Thing

So this is the last week in July. And I say often say how important interest rates are to stock prices and how important projected earnings are to stock prices.

It has nothing to do with what’s happening in the Middle East, even though that’s what makes all the headlines as to the supply and demand for oil. So in the short run, that has a lot to do with the volatility.

What does matter is where interest rates are heading and where earnings are headed.

So this week we had a Fed meeting, and the chairman came out and said that interest rates are going to remain flat. And a lot of people were looking for a cut in the short-term interest rates. And that did not happen. That’s why we had a 1200-point sell-off yesterday.

And then you also have this earnings phenomenon going on. And earnings, some forecasts are made by analysts. And people trade based on those forecasts.

And if you make the number that was forecasted by the Wall Street analysts, you’re getting pounded right now. Because what they’re looking for is a whisper number. A number that’s even better than what is projected. And if you don’t make that number, you’re going to get hit really, really hard.

That’s what happened to Meta. Meta did very, very well. They had some more expenses than they normally do, but their revenue did very well. And it got pounded. And it’s being pounded right now.

Then on the flip side, you have Microsoft, whose whisper number was much higher, and they met that whisper number. So that’s why that stock is moving up so much.

So if you look at today, you can see the S&P or SPY and the Dow Jones and the Nasdaq 100 are all up based on one stock, and that’s Microsoft, not on Meta. Meta is actually dragging it down quite a bit.

But this is why it’s so important as an investor for you to focus on interest rates and earnings forecasts.

We’re currently entering the earnings season. You’re going to see a lot of stocks have phenomenal numbers, but they didn’t meet the whisper number.

And when I say whisper number, this is literally what people will say. Well, I think, you know, XYZ company is going to make a dollar this next quarter, but it really should make a dollar 20. And if it doesn’t, that means, you know, it’s going to not do very well in the future.

And that’s the whisper number. I guess I was whispering.

So you should always look to see that if these tech stocks are not doing much better than what was forecasted, you’re going to see the stock price go lower.

So just something for you to think about. And if you want me to take a look at your portfolio and do an analysis on it, please let me know. I’ll be happy to.

Thanks.

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