Why we would start reweighting US stock-pickers

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The weekly brief

We are past the peak of the U.S. earnings reports. In the past, any unusually high individual stock volatility after an earnings announcement was a pattern that only appeared at macro inflection points. The Q3 season tells us that any additional growth from the tax reform is now behind us and that corporate America is back at cruise level. The share of earnings beats, the size of surprises, guidance and next year’s expectations have all reverted to their long-term average. After a rough start to the season, when any earnings disappointments were severely sanctioned, prices then became increasingly consistent with the stock’s fundamentals, i.e. a key pattern for managers who need prices to reflect the fundamentals they pick stocks for.