Barclays Warns Earnings Trades May Bring Sharper Swings
Venu Krishna sees room for gains on strong results but warns weak guidance may draw harsher penalties amid high expectations.
Key takeaways
- Barclays strategist Venu Krishna calls this earnings season high-risk, high-reward.
- S&P 500 third-quarter earnings growth is expected at 29.6% year over year.
- Analysts forecast 28% earnings growth for the fourth quarter.
Barclays strategist Venu Krishna warns that earnings trades may bring sharp swings. S&P 500 companies are expected to post 29.6% year-over-year earnings growth for the third quarter.
Krishna sees scope for stocks to rise further when companies beat expectations and raise guidance. But he expects missed guidance to face more severe penalties.
He pointed to investors’ heavy positioning in leading technology names such as Nvidia and tepid interest in non-tech stocks. He also said leadership from higher-risk stocks has tended to precede larger selloffs after guidance misses.
Negative market reactions to guidance warnings from Delta and PepsiCo at the start of the reporting season underscored that risk, Krishna said.
FactSet says that if third-quarter growth reaches 29.6%, it would be the third straight quarter above 25% and the eighth consecutive quarter of double-digit growth.
Krishna said weaker survey and sentiment measures reflect cost pressures and rising rates, but hard data still points to robust demand. Analysts expect earnings growth of 28% in the fourth quarter, 32.7% in 2026 and 15.6% in 2027.
This article was produced with the help of AI technology. Source: Yahoo Finance
