What's going on?

�Earnings season� gets underway this week as many major companies prepare to disclose their latest results to investors. Meanwhile, stock markets around the world, including in Germany and the US, keep hitting all-time highs!

What does this mean?

Third quarter earnings unofficially got rolling on Wednesday as Delta and Blackrock reported their earnings; major Wall Street banks follow on Thursday and Friday, before things really kick into high gear over the next weeks.

Overall, profits have been growing at US companies for each of the past four quarters, which is a major reason that stocks have continually hit record highs over that period. Profit growth is expected to have slowed over the past quarter relative to recent quarters, although that�s partly due to the recent hurricanes (i.e. an extraordinary event).

Why should I care?

For markets: Investors are pretty optimistic as earnings season kicks off.


Some market commentators are saying that investors� expectations are actually too low for corporate earnings this quarter, as the expected impact of September�s devastating hurricanes won�t be enough to meaningfully curb profits. Furthermore, even if earnings come in much lower than they did earlier this year, prospects for corporate tax reform in the US, and the strength of economies around the world should help soften the below.

The bigger picture: With historically low interest rates, investors are pushed into riskier investments.


With stock markets breaking record highs over and over, investors and policymakers alike are beginning to wonder if a stock market �bubble� might be taking shape. Stock prices are growing at much faster rates than profits, and there are signs of bubbles elsewhere. One possible reason is that interest rates remain low by historical standards, encouraging investors to pursue riskier assets (like stocks) rather than lend money via bonds, which are perceived to be safer. That�s why the prospect of rising interest rates is considered by some to be a major risk � but, for now, investors� attention appears to be firmly on earnings.