Perfection Priced In?--7/27/2018

Over the last few days, we've seen some pretty important market-related data.

This morning Q2 U.S. GDP figures came out and we saw a 4.1% gain.  That is the biggest gain in almost 4 years.

https://www.cnbc.com/2018/07/27/us-gdp-q2-2018.html

 

Two days ago, we saw Facebook's earnings announcement.  They beat earnings by two cents, but missed on revenue.  And the stock cratered.  In fact, it set the all-time record for most market value of any publicly traded company lost in a single day.

https://www.cnbc.com/2018/07/26/facebook-on-pace-for-biggest-one-day-loss-in-value-for-any-company-sin.html

 

Furthermore, we saw Amazon's earnings last night, they beat Wall Street's earnings estimate by close to 100%!!!  How much is the stock up as I type this?  2.2%!!!!

https://www.cnbc.com/2018/07/26/amazon-earnings-q2-2018.html

 

So, yes things are great!  GDP is booming!  I saw a snippet the other day that 93% of companies that have reported earnings have beaten earnings expectations.  But, I think the market has come to expect this and is demanding that companies beat these rosy expectations.  

Why do I think this?

If you beat earnings expecatations by close to 100%, the stock market reaction is a 2% gain.  If you miss your revenue number, you get clobbered in a manner that we have never seen before in the history of the market. 

That's why.

Perhaps not the end of the world type of stuff, but something to keep an eye on...especially when making security selection decisions.