Kevin O'Leary: U.S. Earnings Are Going To "Blow You Away"
(Kitco News) - Corporate-friendlygovernment policies will lead to an upside surprise in first quarter earningsthat will blow investors away, this according to Shark Tank star, KevinO’Leary.
The U.S. earningsseason kicks off this Friday with three major banks, JPMorgan (NYSE: JPM), Citi Group (NYSE: C), and Wells Fargo(NYSE: WFC), on tapto release their corporate numbers. The biggest factor that will drive earningsthis quarter is the government’s historic tax cuts passed in December, whichtook effect in January, O’Leary said.
“All of thecompanies in the Russell 2000 that used to pay 31% corporate tax rate now pay21%, so the cash flows are going to increase dramatically, not just this quarter,for the next two years,” O’Leary told Kitco News on the sidelines of the “ThreeSharks In A Castle” symposium.
The chairman ofO’Shares ETFs added that competitive corporate tax rates in the U.S. areresponsible for capital leaving Canada to its southern neighbor, particularlyin the energy sector.
Even withoutO’Leary’s enthusiastic outlook, economists’ expectations for the Q1 earningsseason is relatively high. According to FactSet, earnings growth for theS&P 500 is expected to increase 17.1%, the highest earnings growth since Q12011.
Maybe not asoptimistic, O’Leary’s guest at the symposium, Mark Cuban, said that he expectsto see a “good” earnings season.
“I think earningswill be good,” the owner of the Dallas Mavericks told Kitco News. “I thinkAmazon will have a lot to prove...because I think Amazon is still the world’sbest startup; they invest in new things and push things in great directions.”
On theescalating global trade war, O’Leary noted that the proposed U.S. tariffs onChinese goods, and the counter-tariffs put forth by China, are like a “dance”between the two trade partners.
“Wilbur Ross,Larry Kudlow, the president himself, allwent on the air globally and said ‘look,this is the beginning of a protracted negotiation. We don’t want a trade war,but we want more balance on tariffs.’ Themarket has interpreted that to be a positive thing.”
The S&P 500 posted gains on Monday, up 1.5% midday. Markets have reacted positively toeasing rhetoric around the trade tariffs proposed by President Donald Trump, aswell as high hopes for a strong start to earnings season.
O’Leary’spositive equity outlook could pose a problem for a gold market that isstruggling to find momentum. Many analysts have noted that gold has benefited as volatility and uncertainty have picked up inequity markets. June gold futureslast traded at $1,339.70 an ounce, up 0.27%on the day.
By David LinFor Kitco News
Follow @davidlinMTL
dlin@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.