BNP Paribas' Mark Howard tells CNN's Richard Quest why investors are less anxious in the new year, and why he expects stocks to rise in the near term.
BNP Paribas' Mark Howard tells CNN's Richard Quest why investors are less anxious in the new year, and why he expects stocks to rise in the near term.
Now playing
01:50
Mark Howard: We've seen the bottom for stocks
American flags hang oustside of the New York Stock Exchange Tuesday, Feb. 16, 2021, in New York. (AP Photo/Frank Franklin II)
PHOTO: Frank Franklin II/AP
American flags hang oustside of the New York Stock Exchange Tuesday, Feb. 16, 2021, in New York. (AP Photo/Frank Franklin II)
Now playing
01:31
Rising bond yields trigger Wall Street sell-off
WASHINGTON, DC - FEBRUARY 01: U.S. President Joe Biden (Center R) and Vice President Kamala Harris (Center L) meet with 10 Republican senators, including Mitt Romney (R-UT), Bill Cassidy (R-LA) and Susan Collins (R-ME), in the Oval Office at the White House February 01, 2021 in Washington, DC. The senators requested a meeting with Biden to propose a scaled-back $618 billion stimulus plan in response to the $1.9 trillion coronavirus relief package Biden is currently pushing in Congress. (Photo by Doug Mills-Pool/Getty Images)
PHOTO: Pool/Getty Images North America/Getty Images
WASHINGTON, DC - FEBRUARY 01: U.S. President Joe Biden (Center R) and Vice President Kamala Harris (Center L) meet with 10 Republican senators, including Mitt Romney (R-UT), Bill Cassidy (R-LA) and Susan Collins (R-ME), in the Oval Office at the White House February 01, 2021 in Washington, DC. The senators requested a meeting with Biden to propose a scaled-back $618 billion stimulus plan in response to the $1.9 trillion coronavirus relief package Biden is currently pushing in Congress. (Photo by Doug Mills-Pool/Getty Images)
Now playing
02:08
Zandi: Stimulus plan doesn't do enough for the most in need
Now playing
01:36
Michael Bolton wants you to break up with Robinhood
Now playing
03:02
Congressman: The stock market needs to protect retail investors
Now playing
03:51
GameStop investor on why he's still holding on
why it's better to invest cash than save it kristen bitterly orig_00012028.png
why it's better to invest cash than save it kristen bitterly orig_00012028.png
Now playing
01:59
Holding onto your cash? History shows it's better to invest it
In this photo provided by the New York Stock Exchange, Michael Urkonis, center, works with fellow traders on the floor during the Signify Health IPO, Thursday, Feb. 11, 2021. Stocks edged higher on Wall Street in early trading Thursday as investors continued digesting solid corporate earnings reports and maintained confidence that a new round of government aid is on the horizon. (Courtney Crow/New York Stock Exchange via AP)
PHOTO: Courtney Crow/AP
In this photo provided by the New York Stock Exchange, Michael Urkonis, center, works with fellow traders on the floor during the Signify Health IPO, Thursday, Feb. 11, 2021. Stocks edged higher on Wall Street in early trading Thursday as investors continued digesting solid corporate earnings reports and maintained confidence that a new round of government aid is on the horizon. (Courtney Crow/New York Stock Exchange via AP)
Now playing
03:08
El-Erian on risks to the market rally
PHOTO: Courtesy Kearns family
Now playing
02:56
Parents of young trader who died by suicide: Robinhood is to blame
kenny polcari market overvalued and stretched orig_00013830.png
kenny polcari market overvalued and stretched orig_00013830.png
Now playing
02:32
Polcari: A healthy market pullback of 5-7% should happen
Bitcoin
PHOTO: CNN
Bitcoin
Now playing
03:17
Tesla invests $1.5 billion in bitcoin
Now playing
02:20
El-Erian: Robinhood is a reminder that 'you have no friends on Wall Street'
People walk by a GameStop store in Brooklyn on January 28, 2021 in New York City. Markets continue a volatile streak with the Dow Jones Industrial Average rising over 500 points in morning trading following yesterdays losses. Shares of the video game retailer GameStop plunged. (Photo by Spencer Platt/Getty Images)
PHOTO: Spencer Platt/Getty Images
People walk by a GameStop store in Brooklyn on January 28, 2021 in New York City. Markets continue a volatile streak with the Dow Jones Industrial Average rising over 500 points in morning trading following yesterdays losses. Shares of the video game retailer GameStop plunged. (Photo by Spencer Platt/Getty Images)
Now playing
01:17
Here's why GameStop shares are plunging
PHOTO: CNN
Now playing
02:22
His risky bet made him a millionaire on paper. It could've gone very differently
NEW YORK, NEW YORK - JANUARY 27: GameStop store signage is seen on January 27, 2021 in New York City. Stock shares of videogame retailer GameStop Corp has increased 700% in the past two weeks due to amateur investors. (Photo by Michael M. Santiago/Getty Images)
PHOTO: Michael M. Santiago/Getty Images
NEW YORK, NEW YORK - JANUARY 27: GameStop store signage is seen on January 27, 2021 in New York City. Stock shares of videogame retailer GameStop Corp has increased 700% in the past two weeks due to amateur investors. (Photo by Michael M. Santiago/Getty Images)
Now playing
03:16
GameStop mania shakes up Wall Street
Now playing
05:26
Christine Romans: This is being fueled by the elixir of a quick profit
(CNN Business) —  

Earnings season will be back next week, and companies have signaled fourth-quarter profit growth slowed from earlier in the year. The question is whether investors have already priced that in.

It certainly appears that way.

Apple (AAPL) warned last week that its holiday quarter sales would miss forecasts due to China softness. Apple and the broader market took a hit the day of its warnings. Since then, both Apple and the Nasdaq have surged nearly 8%.

Earnings news hasn’t gotten much better.

Samsung, which competes with the iPhone maker but also sells chips that Apple uses in its devices, said this week its latest sales wouldn’t be too hot either. Apple supplier Skyworks (SWKS) warned of softer sales and profits as well.

In the past few weeks, several other companies told investors to expect disappointing results, including Macy’s (M), Corona owner Constellation Brands (STZ), Carnival (CCL) and FedEx (FDX).

So why have investors brushed aside many of these warnings?

People may simply be adjusting to the new economic and market reality. After earnings growth of more than 20% for the S&P 500 during the first three quarters of 2018, it’s only natural that profits would slump a bit in the fourth quarter.

Sure, earnings growth is often very strong in the fourth quarter, thanks to holiday spending and companies rushing to spend what’s left in their budgets at the end of the year.

But consider all the headwinds that consumers and businesses had to face in the past few months: Worries about trade tension with China. Slowing global economic growth. Rising interest rates.

Still, fourth quarter earnings should still be pretty good.

Wall Street analysts predict profit for the S&P 500 will be up more than 11%, according to FactSet. Profits could wind up rising by more than 15%, because more companies tend to beat forecasts than miss them, noted FactSet senior earnings analyst John Butters in a report.

“The market sell-off at the end of last year was overdone,” said Carlos Dominguez, president and chief investment officer of Element Pointe Advisors.

Dominguez thinks investors might flock back to some big tech stocks as they start to realize that earnings growth should still be strong for companies that aren’t exposed to slowing smartphone sales.

Growth is slowing but that isn’t the end of the world

For example, the bad news for Apple shouldn’t necessarily mean that Netflix will have a lousy quarter.

Still, the market is going to be watching closely for clues about the 2019 outlooks. Are companies going to be hit by tariff concerns and other major macroeconomic fears?

So far, the guidance for 2019 is not looking too encouraging. Analysts expect annual earnings growth of just 7.4% and revenue growth of 6% for the S&P 500, according to FactSet.

That would be a big letdown after this year. But the market may have already adjusted for this – and stocks may now be tantalizingly cheap as a result.

John Lynch, chief investment strategist with LPL Financial, noted in a recent report that the S&P 500 was trading for less than 14 times earnings estimates following the huge market sell-off on Christmas Eve. At the start of 2018, stocks were valued at more than 18 times profit forecasts.

That’s a significant pullback in valuations, one that Lynch believes is only justified if the economy was about to go into a tailspin.

“We believe the outlook for economic and corporate profit growth is simply better than stocks are pricing in,” Lynch wrote.

Dec Mullarkey, managing director of investment strategy for Sun Life Investment Management, agrees.

“Market anxiety will be lowered,” Mullarkey said. “Investors should take comfort that things still look strong in America.”