Earnings Season Won’t Make or Break the Stock Market

Updated July 9, 2022 11:34 am ET / Original July 8, 2022 9:27 pm ET

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Earnings season is about to begin, and that means the stock market could finally get its moment of truth.

One might argue that it’s already faced that moment and failed miserably. The S&P 500 after all, has dropped 18% in 2022 and is mired in a bear market. Yet that decline largely reflects the effect of higher bond yields, which force valuations lower, triggering selloffs. The S&P 500’s price/earnings ratio has fallen to 16.4 from 21.5 at the beginning of the year. Earnings estimates, however, remain relatively firm, and if they can stay that way, stocks look relatively cheap.

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