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Should Earnings Season Outweigh Heightened Trade War Fears? | Free Lunch

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On today’s episode of Free Lunch, Associate Stock Strategist Ryan McQueeney discusses the latest escalation of the U.S.-China trade war in the context of Q2 earnings season. The host recaps earnings results from Square and Tesla, and dives into market-wide growth data and forward-looking estimates, to debate whether earnings season should outweigh trade war fears.

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Free Lunch is the newest show from Zacks Investment Research. It is streamed live, four times per week, and features breaking news and analysis from Zacks strategists. Free Lunch is available on YouTube, Facebook Live, Twitter, Ustream, and more.

Investors on Thursday probably wanted to react positively to a number of encouraging headlines, including solid earnings results and the news that Alibaba (BABA - Free Report) and Starbucks (SBUX - Free Report) are teaming up to revolutionize the Chinese coffee industry.

That deal alone—which will see Starbucks leverage all of Alibaba’s properties, both digital and brick-and-mortar, to expand delivery options in China—would likely generate a ton of buzz on a normal day, but there were concerns to be had elsewhere.

Likewise, Wall Street took shares of Square (SQ - Free Report) and Tesla (TSLA - Free Report) higher after their respective earnings reports, but the celebration of strong results was muted on the back of news that the trade war between the U.S. and China might be ratcheting up once again.

President Trump has apparently directed the U.S. trade representative to increase proposed tariffs on $200 billion worth of Chinese imports to 25% from 10%, and Beijing has said it is ready to escalate tensions further if that move does go through.

The ongoing trade war has been casting a huge cloud over an otherwise strong earnings season, and that cloud just got a little darker on Thursday.

Perhaps more concerning is that the trade war—or perhaps some other economic downturn—appears to be having a negative effect on earnings estimates for the third quarter, which have seen a downward trend that has not been witnessed in several quarters.

Keeping all of this in mind, Ryan recaps all of today’s news in an attempt to foster a discussion about the trade war in the context of Q2 earnings season and our current earnings environment.

Have Q2 earnings been strong enough to cool trade war woes? Will Q3 usher in sluggish earnings growth? What should investors be looking at going forward? Make sure to check out the show to hear Ryan’s answers to all of these questions, and more!

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