The fall of the banking industry and the ascent of tech companies into bull market territory have so far in 2023 been the two major events that have defined the US stock market. But going forward, the market will be greatly influenced by three questions: Is the banking sector crisis over? How much have corporate margins fallen? What will the management guidance be?

The recent collapse of several regional US banks will be the main source of worry for investors. However, recent JP Morgan results show that the larger lenders and banks are in a secure position. It will be interesting to see how the financial industry handles the situation. Banking profitability may still be impacted by credit conditions tightening.

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The next major item on investors’ watchlists is corporate earnings. The margins are always being squeezed as a result of businesses decreasing costs and offering discounts to increase sales. In the first three months of the year, cost-reducing measures, including layoffs, were observed. It remains to be seen if the corporations will be able to retain margins.

As per Factset, S&P 500 index is reporting the largest year-over-year decline in earnings since Q2 2020. Earnings decline for the first quarter is expected to be 6.5%. It will mark the largest earnings decline reported by the index since Q2 2020 (-31.6%). It will also mark the second straight quarter in which the index has reported a decrease in earnings.

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Management guidance commentary will take the front stage as earnings season gets underway and investors strive to gauge the health of the consumer-led economy. Many companies gave incredibly poor guidance in their previous quarter reports. Predictions of a recession have also intensified since the banking turbulence last month raised concerns about the soundness of the financial industry.

When viewed collectively, along with the US Fed’s rate decision, the markets may continue to exhibit volatility but may offer long-term investors strong prospects for financial gain.