We spoke with 3 financial experts, who said to make 4 these trades right now to get ahead of surprising gains when earnings season starts next month

  • Second-quarter earnings season will kick off in July, with investors eager to see how the wide-reaching influence of the COVID-19 outbreak will continue to affect corporations.
  • Business Insider spoke with three experts who laid out where they think investors should be looking and putting their money ahead of likely market fluctuations.
  • Some of the recommendations are pegged to industry fundamentals, while others look to capitalize on pricing dislocations created by post-coronavirus market turbulence.
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When he was asked which industries investors might expect to report strong earnings this quarter, ClearBridge Investments’ Michael Clarfeld laughed.

“I’m laughing because it’s difficult to forecast these things normally, but it’s incredibly difficult now,” he said, citing the likely economic impact of recent spikes in COVID-19 cases in various states around the US, which have led companies like Apple to temporarily re-close stores.

Clarfeld, who is a managing director and portfolio manager at ClearBridge Investments, is not alone in his perplexity. Dozens of companies have themselves suspended guidance amid an increasingly uncertain economic environment.

Meanwhile, gauges on the economy have been mixed in recent weeks. The Commerce Department reported Friday that consumer spending — the driving force underpinning the US economy — rose more than 8% in May after falling the most on record in April, though spending levels are still far below pre-coronavirus marks.

But the recent surges in COVID-19 cases cast uncertainty on how sustainable the upward swing is, and other indicators remain lackluster: Income dropped 4.2% in May, and unemployment is still relatively high at 13.3%.

Accordingly, some investors are giving less weight to earnings in the near future, at least until economic indicators begin consistently returning to healthier levels.

“Earnings, I would argue, will matter for the high-tech companies that are enormously overvalued, just to provide some kind of narrative around why those valuations might be justified,” said Michael Gayed, a portfolio manager at Toroso Investments who manages the ATAC Rotation Fund (ATACX), which is up more than 40% year to date. “But beyond that, I don’t know if earnings matter at all at this point.”

But despite investors placing less emphasis on core earnings figures this quarter given the cautious outlook, there will still be ample opportunities for prepared investors to capitalize on share-price fluctuations. Forward guidance will be closely monitored, as will other market-moving corporate announcements.

Business Insider spoke with three financial experts to understand which segments of the market investors should be looking at now to get ahead of surprising gains when earnings season starts next month. Their recommendations are outlined in detail below.

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