Today is the official beginning of the fourth quarter earnings season. Virtually all listed companies around the globe will release their latest earnings reports over the next month. This is no surprise as the market tends to be more volatile over this time. Not just for the stock market; the trends that large companies see can have significant implications on the currency markets.
Analysts have already calculated what to expect from a number of firms, especially those with large capitalizations that could affect the currency market. Some things could have a dramatic impact on the markets, while others could be expected to help.
Growth vs. Inflation
One of the main themes of the last earnings season and could be repeated now is what could be called “ghost profits”. It is when a company reports an improvement in sales, but lower volume. This results in a decrease in revenue, but a higher nominal profit.
That’s because when companies raise prices, their revenue goes up. But if it’s part of inflation, then the actual sales volume might go down. Their sales would be unchanged if there was no inflation