2 Reasons This Earnings Season May Be Especially Unpredictable

As one of the biggest weeks of earnings began on Monday, the S&P 500 closed flat on the day, ahead of earnings announcements from the likes of Netflix Inc NFLX, Tesla TSLA, and Verizon VZ, which are scheduled to report this week.

While the markets have recovered from a pandemic that saw 43 of the 345 companies with a market cap of over $25 billion report losses throughout 2020, investors are now assessing how the war in Ukraine and inflation will affect this earnings season.

Also Read: Bank Of America Investors Give Thumbs-Up To Q1 Earnings: What The Chart Shows

International sanctions have led to global supply chain disruptions, leading to billions of dollars in losses for over 750 companies that have exposure to Russia. As an example, JPMorgan JPM expects to lose up to $1 billion due to its exposure to Russia. Oil titan Shell SHEL said it expects to lose around $5 billion just this quarter.

Fears of inflation continuing to rise this year also add to the uncertainty. The U.S. Department of Labor reported that in March 2022, consumer prices increased by 8.5%, the most significant 12-month advance since December 1981.

In an attempt to curtail inflation that is at its highest in 40 years, the Fed recently raised interest rates by 0.25% and is expected to continue to raise rates until the consensus of 1.9% is reached by the end of 2022. The Fed has indicated the potential for an additional three raises in 2023 as well.