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Inflation Continues its Downward Trend

Inflation Continues its Downward Trend

April 18, 2023

Two important inflation reports were released last week showing a steady decline in inflation. This news bolstered the markets and gave steam to the stock market rally. Now investors are looking to corporate earnings to assess whether the rally can continue.

Analysts expect corporate earnings to decline 5.2% in the first quarter followed by an increase in the second half of the year. There aren’t high expectations for these first quarter earnings so even if earnings come in negative but slightly better than expected the stock market may continue to rise. There have been expectations of a sharp decline in earnings for the past four quarters, which has yet to materialize. Momentum is a powerful force and thus far earnings momentum has been positive and may likely stay positive.

A push from a good, or even better-than-expected, earnings season could send stocks to highs they haven’t seen since August of last year. This could create a virtuous cycle in which negative investor sentiment subsides, investor confidence increases, and the stock market continues to advance to new all-time highs.

Photograph by: Dominik Lückmann on Unsplash´╗┐

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