What Investors Can Expect From 'pivotal' US Earnings Season?

Companies such as Alphabet (Google's parent) and Intuitive Surgical, the leader in robotic surgery, are under greater scrutiny following the equity market moves seen in Q4 and fears that Wall Street could be talking itself into a recession, even if this is not justified by corporate fundamentals.

The tail end of 2018 was undeniably a challenging period for global equity markets amid concerns about rising rates in the US, a burgeoning trade war between the US and China and regional challenges such as Brexit.

Three unexpected sectors where AI is coming to the fore

The shorter-term outlook for stocks remains difficult to call as valuations in absolute terms are clearly more appealing than they were prior to the sell-off, but the macro concerns remain.

There are some key updates this week, and in February, which should give us some valuable insights into how businesses are performing.

Q1 - the key updates so far

Encouragingly, we have yet to see any meaningful slowdown in business activity for the vast majority of AI businesses, with several positive fundamental developments for some companies. Among them was Netflix, which has announced an increase in prices in the vital North American market.

With its increasing content spend, there have been concerns that Netflix is burning through cash, but this spend is helping the company deliver impactful content that keeps users engaged.

The price rise is also expected to be swallowed by users, such is the value the platform offers on-demand viewers relative to other platforms such as Sky.

Even if there is a downturn, Netflix will be among the last things that consumers will want to cut from their discretionary spend.

So far so good then, but there are a number of results to watch this week, and in the coming weeks, which will give a clearer indication of whether talk of a downturn in late 2019 or in 2020 is justified.