Every few months, earnings season rolls around in Australia and across global markets.
Headlines scream about tech stocks rallying, retailers missing expectations, or markets tumbling after disappointing results. For many investors, it feels like a huge event, a time when fortunes can be made or lost.
But here’s the truth:
if you find yourself glued to earnings announcements, you’re probably taking on more risk than you need to.
The noise of earnings season
Markets are forward-looking. By the time a company releases its quarterly results, much of that information has already been priced in. Any genuine surprises, good or bad, are usually reflected in share prices within minutes.
That means reacting to headlines is like chasing a train that’s already left the station. Unless you were positioned before the announcement, there’s very little opportunity to benefit.
Morningstar and other research houses have repeatedly shown that trying to trade around earnings is a losing game for most investors. Not only is it difficult to predict results, it’s even harder to anticipate how the market will interpret them.
What about post-earnings announcement drift?
Back in the late 1980s, academics Bernard and Thomas identified something called Post-Earnings Announcement Drift (PEAD). While Ball and Brown first identified the general phenomenon in 1968, Bernard and Thomas provided the most comprehensive analysis, challenging the Efficient Market Hypothesis. Their research suggested that after a company released better-than-expected results, its share price tended to drift higher for weeks or months afterward, and vice versa for negative surprises.
For a while, this effect was tradable. Investors could buy “winners” and sell “losers” after announcements and profit from the drift.
But markets have evolved. With faster information flows, algorithmic trading, and more eyes on every company report, the opportunity has largely been arbitraged away. More recent studies show that PEAD has weakened significantly and is unreliable in liquid markets like Australia or the US.
Why earnings season is irrelevant for long-term investors
For long-term investors, the quarterly “hits” and “misses” simply don’t matter. Chasing earnings season often leads to:
- Overtrading: frequent buying and selling erodes returns through costs and taxes.
- Concentration risk: betting on individual companies exposes you to bigger risks.
- Short-term distraction: reacting to noise can derail a carefully built strategy.
A well-diversified portfolio spreads risk across hundreds of companies, sectors, and geographies. In that context, no single quarterly report is going to determine your financial success.
The Stockspot approach
At Stockspot, we help clients ignore the noise and stay focused on the bigger picture. Our portfolios are:
- Diversified – spread across thousands of companies, bonds, and gold.
- Low-cost – built with ETFs that keep fees minimal.
- Disciplined – automatically rebalanced to stay aligned with your goals.
Rather than worrying about whether a single company “beat expectations” you can let your investment strategy compound over years and decades.
The bottom line
Earnings season makes for great headlines, but it’s usually irrelevant for long-term investors. The smartest move isn’t trying to trade on every quarterly update. It’s about ignoring the drama, staying diversified, and letting a disciplined strategy do the work.
Ready to invest without the noise?
