Expectations low for quarterly earnings

Most baseball fans know how to bend reality to fit their own expectations. The start of a new season wipes away the disappointment of last year, however briefly. Stock investors can’t afford that luxury.

There is no off-season for corporate earnings but there is a reporting season. It unofficially begins in the week ahead. Alcoa’s financial results on Monday mark the traditional beginning of the quarterly ritual. JP Morgan Chase, Bank of America and Wells Fargo turn in their results before the end of the week.

Hopes are not high for this earnings reporting season. Profits among S&P 500 companies are expected to fall by more than 8 percent compared to a year earlier, according to research firm FactSet. It would mark the fourth straight quarter of falling profits, and the first such streak since the end of the Great Recession.

This run of reduced profits can’t be blamed on lower energy prices. Yes, oil companies have been hit hard by the fall in oil prices. But every major industry represented in the S&P 500 Stock Index is expected to report lower profits for the first quarter. Almost 100 companies already have put their investors on notice that profits shrunk during the first three months of the year.

Like sports fandom, the nature of long-term investing demands optimism and reasons to cheer. Real profit growth is not expected to return for the S&P 500 until the second half of the year. For investors, that hope needs to be reinforced with encouraging performances from companies in the week ahead.

Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.